Confluence-dependent inhibition of epithelial cell proliferation, termed contact inhibition, is crucial for epithelial homeostasis and organ size control. Here we report that among epithelial cells, keratinocytes, which compose the stratified epithelium in the skin, possess a unique, actomyosin-dependent mechanism for contact inhibition. We have observed that under actomyosin-inhibited conditions, cell-cell contact itself through E-cadherin promotes proliferation of keratinocytes. Actomyosin activity in confluent keratinocytes, however, inhibits nuclear localization of β-catenin and YAP, and causes attenuation of β-catenin- and YAP-driven cell proliferation. Confluent keratinocytes develop E-cadherin-mediated punctate adhesion complexes, to which radial actin cables are connected. Eliminating the actin-to-E-cadherin linkage by depleting α-catenin increases proliferation of confluent keratinocytes. By contrast, enforced activation of RhoA-regulated actomyosin or external application of pulling force to ligated E-cadherin attenuates their proliferation, suggesting that tensile stress at E-cadherin-mediated adhesion complexes inhibits proliferation of confluent keratinocytes. Our results highlight actomyosin contractility as a crucial factor that provokes confluence-dependent inhibition of keratinocyte proliferation.