A functional epidermal skin barrier requires the formation of a cornified envelope from terminally differentiating keratinocytes. During this process, multiple genetic and environmental signals coordinately regulate protein expression and tissue differentiation. Here we describe a critical role for hypoxia-inducible factors (HIFs) in the regulation of filaggrin expression and skin barrier formation. Similar to other mammalian tissues, fetal epidermis in mice is normally O2 deprived. Simultaneous deletion of Hif1a and Hif2a in murine epidermis revealed defects in keratinocyte terminal differentiation and epidermal barrier formation. Mice lacking Hif1a and Hif2a in the epidermis exhibited dry flaky skin, impaired permeability barrier, and enhanced sensitivity to cutaneous allergens. These defects were correlated with stratum granulosum attenuation and reduced filaggrin expression. Hypoxic treatment of primary keratinocytes induced filaggrin (Flg) gene expression in a HIF1α- and HIF2α-dependent manner, suggesting that one mechanism by which Hif1a and Hif2a loss causes epidermal barrier defects in mice lies in Flg dysregulation. Therefore, low O2 tension is an essential component of the epidermal environment that contributes to skin development and function.