The Notch ligand Delta1 (Dll1) is expressed in human interfollicular epidermis (IFE) and regulates differentiation and adhesion of cultured human keratinocytes. However, the consequences of deleting Dll1 in mouse epidermis have not been examined. Here, we report that in embryonic mouse skin Dll1 is expressed by patches of keratinocytes in the basal layer of the IFE and in the dermal papilla and hair bulb. In a Dll1 hypomorph mutant that survives until birth, hair follicles formed normally but proliferation and thickness of the IFE were increased. Deletion of Dll1 using Cre recombinase expressed under the control of the keratin-5 (K5) promoter resulted in a delay in the first postnatal anagen, but subsequent hair cycles were normal. As in the hypomorph, IFE proliferation was stimulated and expression of K10 and K17 was disturbed. Older mice developed tumors with elements of IFE differentiation. Keratinocytes cultured from K5Cre x Dll1(flox/flox) epidermis showed a transient increase in proliferation, with a subsequent decrease in integrin expression and increased terminal differentiation. These results demonstrate that Dll1 contributes to the control of proliferation and differentiation in IFE, whereas Jagged1 regulates hair follicle differentiation.