Mice lacking p63, a single gene that encodes a group of transcription factors that either contain (TA) or lack (⌬N) a transactivation domain, fail to develop stratified epithelia as well as epithelial appendages and limbs. ⌬Np63 isoforms are predominantly expressed during late embryonic and postnatal epidermal development, however, the function of these proteins remains elusive. Using an epidermal-specific inducible knockdown mouse model, we demonstrate that ⌬Np63 proteins are essential for maintaining basement membrane integrity and terminal differentiation of keratinocytes. Furthermore, we have identified two ⌬Np63␣ target genes that mediate these processes. We propose that ⌬Np63␣ initially induces expression of the extracellular matrix component Fras1, which is required for maintaining the integrity of the epidermal-dermal interface at the basement membrane. Subsequently, induction of I B kinase-␣ by ⌬Np63␣ initiates epidermal terminal differentiation resulting in the formation of the spinous layer. Our data provide insights into the role of ⌬Np63␣ in epidermal morphogenesis and homeostasis, and may contribute to our understanding of the pathogenic mechanisms underlying disorders caused by p63 mutations.