Several ganglionic nicotinic acetylcholine receptor (nAChR) types are abundantly expressed in nonneuronal locations, but their functions remain unknown. We found that keratinocyte α7 nAChR controls homeostasis and terminal differentiation of epidermal keratinocytes required for formation of the skin barrier. The effects of functional inactivation of α7 nAChR on keratinocyte cell cycle progression, differentiation, and apoptosis were studied in cell monolayers treated with α-bungarotoxin or antisense oligonucleotides and in the skin of Acra7 homozygous mice lacking α7 nAChR channels. Elimination of the α7 signaling pathway blocked nicotine-induced influx of ⁴⁵Ca²⁺ and also inhibited terminal differentiation of these cells at the transcriptional and/or translational level. On the other hand, inhibition of the α7 nAChR pathway favored cell cycle progression. In the epidermis of α7^−/− mice, the abnormalities in keratinocyte gene expression were associated with phenotypic changes characteristic of delayed epidermal turnover. The lack of α7 was associated with up-regulated expression of the α3 containing nAChR channels that lack α5 subunit, and both homomeric α9- and heteromeric α9α10-made nAChRs. Thus, this study demonstrates that ACh signaling through α7 nAChR channels controls late stages of keratinocyte development in the epidermis by regulating expression of the cell cycle progression, apoptosis, and terminal differentiation genes and that these effects are mediated, at least in part, by alterations in transmembrane Ca²⁺ influx.