Lymphotoxin-beta (LTbeta) is a key regulator of immune system development, but also affects late stages in hair development. In addition, high expression of LTbeta at an early stage in epidermis hinted at a further function in hair follicle induction or epithelial development. We report that hair follicles were normally induced in LTbeta(-/-) skin, but the periderm detached from the epidermis earlier, accompanied by premature appearance of keratohyalin granules. Expression profiling revealed dramatic down-regulation of a gene cluster encoding periderm-specific keratin-associated protein 13 and four novel paralogs in LTbeta(-/-) skin prior to periderm detachment. Epidermal differentiation markers, including small proline-rich proteins, filaggrins and several keratins, were also affected, but transiently in LTbeta(-/-) skin at the time of abnormal periderm detachment. As expected, Tabby mice, which lack the EDA gene, the putative upstream regulator of LTbeta in skin, showed similar though milder periderm histopathology and alterations in gene expression. Overall, LTbeta shows a primary early function in periderm differentiation, with later transient effects on epidermal and hair follicle differentiation.