CXCR4 is expressed by basal keratinocytes (KCs), but little is known about its function in inflamed skin. We crossed K14-Cre and CXCR4(flox/flox (f/f)) transgenic mice, resulting in mice with specific loss of the CXCR4 gene in K14-expressing cells (K14-CXCR4KO), including basal KCs. K14-CXCR4KO pups had no obvious skin defects. We compared K14-CXCR4KO and CXCR4(f/f) control mice in an IL-23-mediated psoriasiform dermatitis model and measured skin edema, and histologic and immunohistological changes. IL-23-treated K14-CXCR4KO mice showed a 1.3-fold increase in mean ear swelling, a 2-fold increase in epidermal thickness, and greater parakeratosis. IL-23-treated wild-type (WT) mice showed weak CXCR4 expression in areas of severe epidermal hyperplasia, but strong CXCR4 expression in nonhyperplastic regions, suggesting that CXCR4 may regulate KC proliferation. To test this hypothesis, we overexpressed CXCR4 in HaCaT KC cells and treated them with IL-22 and/or CXCL12 (chemokine (C-X-C motif) ligand 12). CXCL12 blocked IL-22-mediated HaCaT cell proliferation in vitro and synergized with IL-22 in upregulating SOCS3 (suppressor of cytokine signaling 3), a key regulator of STAT3 (signal transducer and activator of transcription 3). SOCS3 was required for CXCR4-mediated growth inhibition. In human psoriatic skin, both CXCR4 and SOCS3 were upregulated in the junctional region at the border of psoriatic plaques. Thus, CXCR4 has an unexpected role in inhibiting KC proliferation and mitigating the effects of proliferative T helper type 17 cytokines.