The histoarchitecture and function of the epidermis depend on a well-controlled balance between keratinocyte proliferation and differentiation. This balance is perturbed after skin injury, and imbalance is a characteristic feature of major human skin diseases such as psoriasis and epidermal cancers. Recent studies have highlighted the importance of fibroblast-derived soluble factors for the regulation of keratinocyte proliferation and differentiation. Therefore, identification of these paracrine-acting factors and the elucidation of their mechanisms of action are necessary for understanding epidermal homeostasis, repair and disease, and these approaches will offer new potential targets for drug therapy. Here, we review exciting recent findings on the identification, regulation and function of paracrine-acting cytokines in the skin. In particular, we describe the role of fibroblast-derived mitogens as regulators of keratinocyte proliferation and differentiation, and we summarize the regulation of these factors by keratinocyte-derived interleukin 1 that involves the transcription factors c-Jun and JunB.