The epidermis is maintained by proliferation of stem cells and differentiation of their progeny. In my PhD thesis I have studied the mechanisms by which these processes are compartmentalised. P-catenin levels determine lineage commitment in the epidermis. I investigated the role of p-catenin in patterning of the epidermal stem cell compartment and its niche during de novo hair follicle formation. For this I used K14ANP-cateninER transgenic mice. I found that the levels of p-catenin activation determine the number and location of ectopic hair follicles, showing that follicle formation is a threshold-response event. To dissect the downstream effects of p-catenin signalling, I performed microarray analysis and saw that the Hedgehog pathway is upregulated by p-catenin activation. Inhibition of Hedgehog signalling attenuates the effects of p-catenin. The array also revealed that p-catenin regulates the Eph/ephrin protein family. I found that several ephrin-B ligands and EphB receptors are expressed in distinct zones in mouse skin. In order to study the mechanisms modulating epidermal niche patterning I have analysed EphB2, EphB3 and ephrin-B1 null epidermis. EphB/ephrin-B signalling controls hair follicle spacing, patterning along the radial follicle axis, interfollicular epidermal differentiation and melanocyte localisation. Disruption of EphB/ephrin-B signalling disturbs proliferation, uncoupling expression of K15, CD34 and clonal growth capacity. In culture keratinocytes that differ in EphB/ephrin-B expression segregate from one another, reflecting differences in cell shape, motility and integrin expression. EphB3 and ephrin-B1 are induced on activation of p-catenin and augment p-catenin induced cell clustering. Conversely, EphB/ephrin-B signalling negatively regulates p-catenin activation. Ephrin-B/EphB signalling is a key determinant of epidermal pattern, proliferation and differentiation. In summary, I have elucidated the role of p-catenin, Hedgehog and EphB/ephrin-B signalling in regulating epidermal proliferation, differentiation and morphogenesis.