Epidermal stem cells sustain the adult skin for a lifetime through self-renewal and the production of committed progenitors. These stem cells generate progeny that will undergo terminal differentiation leading to the development of a protective epidermal barrier. Whereas the molecular mechanisms that govern epidermal barrier repair and renewal have been extensively studied, pathways controlling stem cell differentiation remain poorly understood. Asymmetric cell divisions, small non-coding RNAs (microRNAs), chromatin remodeling complexes, and multiple differentiation factors tightly control the balance of stem and progenitor cell proliferation and differentiation, and disruption of this balance leads to skin diseases. In this review, we summarize and discuss current advances in our understanding of the mechanisms regulating epidermal stem and progenitor cell differentiation, and explore new relationships for maintenance of skin barrier function.