Setd8/PR-Set7/KMT5a-dependent mono-methylation of histone H4 at lysine 20 is essential for mitosis of cultured cells; yet, the functional roles of Setd8 in complex mammalian tissues are unknown. We use skin as a model system to explore how Setd8 may regulate cell division in vivo. Deletion of Setd8 in undifferentiated layers of the mouse epidermis impaired both proliferation and differentiation processes. Long-lived epidermal progenitor cells are lost in the absence of Setd8, leading to an irreversible loss of sebaceous glands and interfollicular epidermis. We show that Setd8 is a transcriptional target of c-Myc and an essential mediator of Myc-induced epidermal differentiation. Deletion of Setd8 in c-Myc-overexpressing skin blocks proliferation and differentiation and causes apoptosis. Increased apoptosis may be explained by our discovery that p63, an essential transcription factor for epidermal commitment is lost, while p53 is gained upon removal of Setd8. Both overexpression of p63 and deletion of p53 rescue Setd8-induced apoptosis. Thus, Setd8 is a crucial inhibitor of apoptosis in skin and its activity is essential for epidermal stem cell survival, proliferation and differentiation.