Heparin-binding growth factors are crucial for the formation of human epidermis, but little is known about the role of heparan sulfate proteoglycans in this process. Here we investigated the role of the heparan sulfate proteoglycan, perlecan, in the formation of human epidermis, by utilizing in vitro engineered human skin. By disrupting perlecan expression either in the dermis or the epidermis, we found that epidermally derived perlecan is essential for epidermal formation. Perlecan-deficient keratinocytes formed a strikingly thin and poorly organized epidermis because of premature apoptosis and failure to complete their stratification program. Exogenous perlecan fully restored epidermal formation. Perlecan deposition in the basement membrane zone correlated with formation of multilayered epidermis. Perlecan deficiency, however, had no effect on the lining and deposition of major basement membrane components as was evident by a continuous linear staining of laminin and collagen IV. Similarly, perlecan deficiency did not affect the distribution of beta1 integrin. Addition of the perlecan ligand, fibroblast growth factor 7, protected perlecan-deficient keratinocytes from cell death and improved the thickness of the epidermis. Taken together, our results revealed novel roles for perlecan in epidermal formation. Perlecan regulates both the survival and terminal differentiation steps of keratinocytes. Our results suggested a model whereby perlecan regulates these processes via controlling the bioavailability of perlecan-binding soluble factors involved in epidermal morphogenesis.