p53 transcription factor is mutated in most skin cell carcinomas and in more than 50% of all human malignancies. One of its transcriptional targets is MDM2, which in turn down-regulates p53. The role of the p53/MDM2 regulatory loop upon genotoxic stress is well documented, but less is known about its role in normal tissue homeostasis. We have explored this pathway during the different transitions of the human epidermal differentiation programme and after isolating stem cells, transit amplifying cells or differentiating cells from epidermis. Maximum expression of p53 was found in proliferating keratinocytes. A striking and transient induction of MDM2 and a down-modulation of p53 characterized the transition from proliferation to differentiation in primary human keratinocytes. These changes were delayed in late differentiating carcinoma cells, and were clearly different in suspended primary fibroblasts. Interestingly, these changes correlated with an increase in cell size, at the time of irreversible commitment to differentiation. Induction of MDM2 was also associated with suppression of proliferation in normal, or hyperproliferative, psoriatic epidermis. Moreover, both proteins were induced as keratinocytes were driven to leave the stem cell compartment by c-Myc activation. Overall, our results show a critical regulation of the p53/MDM2 pathway at the epidermal transition from proliferation to differentiation.