Heparanase is the sole mammalian endoglycosidase that selectively degrades heparan sulfate, the key polysaccharide associated with the cell surface and extracellular matrix of a wide range of tissues. Extensively studied for its capacity to promote cancer progression, heparanase enzyme was recently implicated as an important determinant in several inflammatory disorders as well. Applying immunohistochemical staining, we detected preferential expression of heparanase by epidermal keratinocytes in human psoriatic lesions. To investigate the role of the enzyme in the pathogenesis of psoriasis, we utilized heparanase transgenic mice in a model of 12-O-tetradecanoyl phorbol 12-myristate 13-acetate-induced cutaneous inflammation. We report that over-expression of the enzyme promotes development of mouse skin lesions that strongly recapitulate the human disease in terms of histomorphological appearance and molecular/cellular characteristics. Importantly, heparanase of epidermal origin appears to facilitate abnormal activation of skin-infiltrating macrophages, thus generating psoriasis-like inflammation conditions, characterized by induction of STAT3, enhanced NF-κB signaling, elevated expression of TNF-α and increased vascularization. Taken together, our results reveal, for the first time, involvement of heparanase in the pathogenesis of psoriasis and highlight a role for the enzyme in facilitating abnormal interactions between immune and epithelial cell subsets of the affected skin. Heparanase inhibitors (currently under clinical testing in malignant diseases) could hence turn highly beneficial in psoriatic patients as well.