While important in carcinogenesis, the role of Ras in normal self-renewing tissues such as epidermis is unclear. To address this, we altered Ras function in undifferentiated and differentiating epidermal layers. Ras blockade within undifferentiated basal epidermal cells leads to decreased integrin expression, diminished growth capacity and induction of differentiation. Ras blockade in post-mitotic suprabasal epidermis exerts no effect. In contrast, regulated Ras and Raf activation inhibits differentiation. These findings indicate that spatially restricted Ras/Raf signaling divides epidermis into an undifferentiated proliferative compartment and a differentiating post-mitotic compartment and suggest a new role for Ras in tissue homeostasis.