Interactions between the epidermis and the immune system govern epidermal tissue homeostasis. These epidermis-immune interactions are altered in the inflammatory disease psoriasis; however, the pathways that underlie this aberrant immune response are not well understood. Here, we determined that Ras-related C3 botulinum toxin substrate 1 (RAC1) is a key mediator of epidermal dysfunction. RAC1 activation was consistently elevated in psoriatic epidermis and primary psoriatic human keratinocytes (PHKCs) exposed to psoriasis-related stimuli, but not in skin from patients with basal or squamous cell carcinoma. Expression of a constitutively active form of RAC1 (RACV12) in mice resulted in the development of lesions similar to those of human psoriasis that required the presence of an intact immune system. RAC1V12-expressing mice and human psoriatic skin showed similar RAC1-dependent signaling as well as transcriptional overlap of differentially expressed epidermal and immune pathways. Coculture of PHKCs with immunocytes resulted in the upregulation of RAC1-dependent proinflammatory cytokines, an effect that was reproduced by overexpressing RAC1 in normal human keratinocytes. In keratinocytes, modulating RAC1 activity altered differentiation, proliferation, and inflammatory pathways, including STAT3, NFκB, and zinc finger protein 750 (ZNF750). Finally, RAC1 inhibition in xenografts composed of human PHKCs and immunocytes abolished psoriasiform hyperplasia and inflammation in vivo. These studies implicate RAC1 as a potential therapeutic target for psoriasis and as a key orchestrator of pathologic epidermis-immune interactions.