The mammalian epidermis is a highly accessible tissue in which to study the properties of adult stem cells. Global gene expression profiling has revealed new markers and regulators of the stem cell compartment. Although stem cells have the potential to differentiate into multiple lineages, their progeny follow a more restricted number of lineages in undamaged epidermis as a result of local microenvironmental cues. The response of the epidermis to a particular signal depends on signal strength and duration. Recent advances in the field have led to elucidation of the mechanisms by which stem cells are maintained and the pathways that interact with Wnt signalling to specify lineage choice as cells leave the stem cell compartment. This work has also yielded new insights into skin tumour development.