An organism's outermost covering, the integument, has evolved to fulfil a diverse range of functions. Skin provides a physical barrier, an environment for immunological surveillance, and also performs a range of sensory, thermoregulatory and biosynthetic functions. Examination of the skin of limb digits reveals a range of skin types including the thickened hairless epidermis of the toe pads (palmar or plantar epidermis) and thinner epidermis between the hair follicles (interfollicular epidermis) of hairy skin. An important developmental function of skin is to give rise to a diverse group of appendages including hair follicles, with associated sebaceous glands (or feathers and scales in chick), eccrine sweat glands and the nail. A key question is how does this morphological variety arise from the single-layered epithelium covering embryonic limb buds? This review will attempt to address this question by linking the extensive morphological/anatomical data on maturation of epidermis and its appendages with (1) current research into the range, plasticity and location of the putative epidermal stems cells; (2) molecular/microenvironmental regulation of epidermal stem cell lineages and lineage choice; and (3) regulation of the differentiation pathways, focusing on differentiation of the interfollicular epidermis.