The current belief is that the epidermal sebaceous gland (SG) is maintained by unipotent stem cells that are replenished by multipotent stem cells in the hair follicle (HF) bulge. However, sebocytes can be induced by c-Myc (Myc) activation in interfollicular epidermis (IFE), suggesting the existence of bipotential stem cells. We found that every SZ95 immortalized human sebocyte that underwent clonal growth in culture generated progeny that differentiated into both sebocytes and cells expressing involucrin and cornifin, markers of IFE and HF inner root sheath differentiation. The ability to generate involucrin positive cells was also observed in a new human sebocyte line, Seb-E6E7. SZ95 xenografts differentiated into SG and IFE but not HF. SZ95 cells that expressed involucrin had reduced Myc levels; however, this did not correlate with increased expression of the Myc repressor Blimp1, and Blimp1 expression did not distinguish cells undergoing SG, IFE, or HF differentiation in vivo. Overexpression of Myc stimulated sebocyte differentiation, whereas overexpression of beta-catenin stimulated involucrin and cornifin expression. In transgenic mice simultaneous activation of Myc and beta-catenin revealed mutual antagonism: Myc blocked ectopic HF formation and beta-catenin reduced SG differentiation. Overexpression of the Myc target gene Indian hedgehog did not promote sebocyte differentiation in culture and cyclopamine treatment, while reducing proliferation, did not block Myc induced sebocyte differentiation in vivo. Our studies provide evidence for a bipotential epidermal stem cell population in an in vitro model of human epidermal lineage selection and highlight the importance of Myc as a regulator of sebocyte differentiation.