Transcriptional control plays a key role in regulating epidermal proliferation and differentiation. Although ample information has been obtained on how epidermal homeostasis is controlled in adult skin, less is known about the control of proliferation/differentiation of epidermal stem/progenitor cells in the developing embryo. Ovol1, encoding a zinc finger protein homologous to Drosophila melanogaster Ovo, is expressed in embryonic epidermal progenitor cells that are transiting from proliferation to terminal differentiation. In this study, we demonstrate a function for Ovol1 in interfollicular epidermal development. In its absence, developing epidermis fails to properly restrict the proliferative potential of progenitor cells, and cultured keratinocytes fail to efficiently undergo growth arrest in response to extrinsic growth-inhibitory signals. We present molecular evidence that c-myc expression is up-regulated in Ovol1-deficient suprabasal cells and that Ovol1 represses c-myc transcription by directly binding to its promoter. Collectively, our findings indicate that Ovol1 is required for proliferation exit of committed epidermal progenitor cells and identify c-myc as an Ovol1 target.