The M3 muscarinic acetylcholine receptor is predominantly expressed in the basal epidermal layer where it mediates the effects of the autocrine/paracrine cytotransmitter acetylcholine. Patients with the autoimmune blistering disease pemphigus develop autoantibodies to M3 muscarinic acetylcholine receptor and show alterations in keratinocyte adhesion, proliferation, and differentiation, suggesting that M3 muscarinic acetylcholine receptor controls these cellular functions. Chmr3-/- mice display altered epidermal morphology resembling that seen in patients with pemphigus vulgaris. In this study, we characterized the cellular and molecular mechanisms through which M3 muscarinic acetylcholine receptor controls epidermal structure and function. We used single-cell RNA sequencing to evaluate keratinocyte heterogeneity and identify differentially expressed genes in specific subpopulations of epidermal cells in Chmr3-/- neonatal mice. We found that Chmr3-/- mice feature abnormal epidermal morphology characterized by accumulation of nucleated basal cells, shrinkage of basal keratinocytes, and enlargement of intercellular spaces. These morphologic changes were associated with upregulation of cell proliferation genes and downregulation of genes contributing to epidermal differentiation, extracellular matrix formation, intercellular adhesion, and cell arrangement. These findings provide, to our knowledge, previously unreported insights into how acetylcholine controls epidermal differentiation and lay a groundwork for future translational studies evaluating the therapeutic potential of cholinergic drugs in dermatology.