Expression of p63, a transcription factor that is transcribed into six isoforms, is required for proper development of stratified epithelia, such as the epidermis. In the absence of p63, epithelia remain single-layered. The molecular role of p63 in development and differentiation of stratified epithelia, however, remains controversial. Based on recent studies, we now believe that p63 has a dual role and is essential for development as well as maintenance of the epidermis. During embryogenesis, p63 may be the molecular switch required for initiation of epithelial stratification. This is based on our recent data demonstrating that ectopic expression of a p63 isoform in single-layered epithelia results in the induction of a stratification program. Furthermore, in the mature epidermis, p63 may maintain the proliferative potential of basal keratinocytes. This is suggested by the observation that p63 is primarily expressed in the basal compartment of the epidermis, that p63 expression induces hyperproliferation, and that its expression needs to be downregulated for terminal differentiation to take place. In this review, we discuss recent evidence supporting this dual role for p63 and place it in the context of our increasing knowledge of epidermal development and differentiation.