Determining the roles of Rel/NF-kappaB transcription factors in mouse skin development with loss-of-function mutants has been limited by redundancy among these proteins and by embryonic lethality associated with the absence of RelA. Using mice lacking RelA and c-rel, which survive throughout embryogenesis on a tumor necrosis factor alpha (TNF-alpha)-deficient background (rela(-/-) c-rel(-/-) tnfalpha(-/-)), we show that c-rel and RelA are required for normal epidermal development. Although mutant fetuses fail to form tylotrich hair and have a thinner epidermis, mutant keratinocyte progenitors undergo terminal differentiation to form an outer cornified layer. Mutant basal keratinocytes are abnormally small, exhibit a delay in G(1) progression, and fail to form keratinocyte colonies in culture. In contrast to the reduced proliferation of mutant keratinocytes during embryogenesis, skin grafting experiments revealed that the mutant epidermis develops a TNF-alpha-dependent hyperproliferative condition. Collectively, our findings indicate that RelA and c-rel control the development of the epidermis and associated appendages during embryogenesis and regulate epidermal homeostasis in a postnatal environment through the suppression of innate immune-mediated inflammation.