The evolutionarily conserved family of AP-2 transcription factors (TF) regulates proliferation, differentiation, and apoptosis. Mutations in human AP-2 TF have been linked with bronchio-occular-facial syndrome and Char Syndrome, congenital birth defects characterized by craniofacial deformities and patent ductus arteriosus, respectively. How mutations in AP-2 TF cause the disease phenotypes is not well understood. Here, we characterize the aptf-2(qm27) allele in Caenorhabditis elegans, which carries a point mutation in the conserved DNA binding region of AP-2 TF. We show that compromised APTF-2 activity leads to defects in dorsal intercalation, aberrant ventral enclosure and elongation defects, ultimately culminating in the formation of morphologically deformed larvae or complete arrest during epidermal morphogenesis. Using cell lineaging, we demonstrate that APTF-2 regulates the timing of cell division, primarily in ABarp, D and C cell lineages to control the number of neuroblasts, muscle and epidermal cells. Live imaging revealed nuclear enrichment of APTF-2 in lineages affected by the qm27 mutation preceding the relevant morphogenetic events. Finally, we found that another AP-2 TF, APTF-4, is also essential for epidermal morphogenesis, in a similar yet independent manner. Thus, our study provides novel insight on the cellular-level functions of an AP-2 transcription factor in development.