The thyroid hormone-inactivating (TH-inactivating) enzyme type 3 iodothyronine deiodinase (D3) is an oncofetal protein that is rarely expressed in adult life but has been shown to be reactivated in the context of proliferation and neoplasms. D3 terminates TH action within the tumor microenvironment, thereby enhancing cancer cell proliferation. However, the pathological role of D3 and the contribution of TH metabolism in cancer have yet to be fully explored. Here, we describe a reciprocal regulation between TH action and the cancer-associated microRNA-21 (miR21) in basal cell carcinoma (BCC) skin tumors. We found that, besides being negatively regulated by TH at the transcriptional level, miR21 attenuates the TH signal by increasing D3 levels. The ability of miR21 to positively regulate D3 was mediated by the tumor suppressor gene GRHL3, a hitherto unrecognized D3 transcriptional inhibitor. Finally, in a BCC mouse model, keratinocyte-specific D3 depletion markedly reduced tumor growth. Together, our results establish TH action as a critical hub of multiple oncogenic pathways and provide functional and mechanistic evidence of the involvement of TH metabolism in BCC tumorigenesis. Moreover, our results identify a miR21/GRHL3/D3 axis that reduces TH in the tumor microenvironment and has potential to be targeted as a therapeutic approach to BCC.