Transcription factors of the Grainy head (Grh) family are required in epithelia to generate the impermeable apical layer that protects against the external environment. This function is conserved in vertebrates and invertebrates, despite the differing molecular composition of the protective barrier. Epithelial cells also have junctions that create a paracellular diffusion barrier (tight or septate junctions). To examine whether Grh has a role in regulating such characteristics, we used an epidermal layer in the Drosophila embryo that has no endogenous Grh and lacks septate junctions, the amnioserosa. Expression of Grh in the amnioserosa caused severe defects in dorsal closure, a process similar to wound closure, and induced robust expression of the septate junction proteins Coracle, Fasciclin 3 and Sinuous. Grh-binding sites are present within the genes encoding these proteins, consistent with them being direct targets. Removal of Grh from imaginal disc cells caused a reduction in Fasciclin 3 and Coracle levels, suggesting that Grh normally fine tunes their epithelial expression and hence contributes to barrier properties. The fact that ectopic Grh arrests dorsal closure also suggests that this dynamic process relies on epithelia having distinct adhesive properties conferred by differential deployment of Grh.