Although basal permeability barrier function is established at birth, the higher risk for infections, dermatitis, and percutaneous absorption of toxic agents may indicate incomplete permeability barrier maturation in the early neonatal period. Since stratum corneum (SC) acidification in adults is required for normal permeability barrier homeostasis, and lipid processing occurs via acidic pH dependent enzymes, we hypothesized that, in parallel with the less acidic surface pH, newborn SC would exhibit signs of incomplete barrier formation. Fluorescence lifetime imaging reveals that neonatal rat SC acidification first becomes evident by postnatal day 3, in extracellular "microdomains" at the SC- stratum granulosum (SG) interface, where pH-sensitive lipid processing is known to occur. This localized acidification correlated temporally with efficient processing of secreted lamellar body contents to mature extracellular lamellar bilayers. Since expression of the key acidifying mechanism NHE1 is maximal just prior to birth, and gradually declines over the first postnatal week, suboptimal SC acidification at birth cannot be attributed to insufficient NHE1 expression, but could instead reflect reduced NHE1 activity. Expression of the key lipid processing enzyme, beta-glucocerebrosidase (beta-GlcCer'ase), develops similar to NHE1, excluding a lack of beta-GlcCer'ase protein as rate limiting for efficient lipid processing. These results define a postnatal development consisting of initial acidification in the lower SC followed by outward progression, which is accompanied by formation of mature extracellular lamellar membranes. Thus, full barrier competence appears to require the extension of acidification in microdomains from the SC/SG interface outward toward the skin surface in the immediate postnatal period.