Epidermal permeability barrier formation depends upon lamellar body (LB) secretion/fusion with the apical plasma membrane (APM) of outermost stratum granulosum (SG) cell, creating cholesterol/glycosphingolipid-enriched lipid rafts-like domains. We found that the dimensions of these domains are comparable to lipid raft in other cell types; and that acute barrier disruption regulates their size and dynamics. To assess the function of these LB-derived raft-like domains, we assessed APM dynamics and barrier recovery in methyl-beta-cyclodextrin (MbetaCD)-treated hairless mice and caveolin-1 knockouts (cav-1(-/-)). MbetaCD treatment impaired APM raft-like domain formation and barrier recovery. Accelerated barrier recovery is observed in cav-1(-/-) in parallel with expansion of raft-like domains. Barrier abrogation of normal epidermis resulted in translocation of cav-1 from the cytoplasm to raft-like membrane domains, restricting further raft-like domain formation and initiating terminal differentiation. Inhibition of LB secretion by monensin and absence of cav-1 delayed terminal differentiation. Furthermore, cav-1(-/-) mice exhibited an increased propensity to develop experimentally induced epidermal hyperplasia correlating with lipid raft persistence. Finally, the epidermal hyperplasia in psoriasis and Netherton syndrome is paralleled by increased lipid raft formation. These studies demonstrate that cav-1 delivery to the APM by LB trafficking to APM "brakes" further LB secretion, signals terminal differentiation, and regulates epidermal hyperproliferation.