The rough coat (rc) spontaneous mutation causes sebaceous gland hypertrophy, hair loss and extracutaneous abnormalities including growth retardation. The rc mice have a missense mutation in the predicted immunoglobulin protein Mpzl3. In this study, we generated Mpzl3 knockout mice to determine its functions in the skin. Homozygous Mpzl3 knockout mice showed unkempt and greasy hair coat and hair loss soon after birth. Histological analysis revealed severe sebaceous gland hypertrophy and increased dermal thickness, but did not detect significant changes in the hair cycle. Mpzl3 null mice frequently developed inflammatory skin lesions; however, the early onset skin abnormalities were not the results of immune defects. The abnormalities in the Mpzl3 knockout mice resemble closely those observed in the rc/rc mice, as well as mice heterozygous for both the rc and Mpzl3 knockout alleles, indicating that rc and Mpzl3 are allelic. Using a lacZ reporter gene, we detected Mpzl3 promoter activity in the companion layer and inner root sheath of the hair follicle, sebaceous gland, and epidermis. Loss of MPZL3 function also caused a striking reduction in cutaneous and overall adipose tissue. These data reveal a complex role for Mpzl3 in the control of skin development, hair growth and adipose cell functions.