Keratinocyte terminal differentiation is the process that ultimately forms the epidermal barrier that is essential for mammalian survival. This process is controlled, in part, by signal transduction and gene expression mechanisms, and the epidermal growth factor receptor (EGFR) is known to be an important regulator of multiple epidermal functions. Using microarray analysis of a confluent cell density-induced model of keratinocyte differentiation, we identified 2,676 genes that are regulated by epidermal growth factor (EGF), a ligand of the EGFR. We further discovered, and separately confirmed by functional assays, that EGFR activation abrogates all of the known essential processes of keratinocyte differentiation by 1) decreasing the expression of lipid matrix biosynthetic enzymes, 2) regulating numerous genes forming the cornified envelope, and 3) suppressing the expression of tight junction proteins. In organotypic cultures of skin, EGF acted to impair epidermal barrier integrity, as shown by increased transepidermal water loss. As defective epidermal differentiation and disruption of barrier function are primary features of many human skin diseases, we used bioinformatic analyses to identify genes that are known to be associated with skin diseases. Compared with non-EGF-regulated genes, EGF-regulated genes were significantly enriched for skin disease genes. These results provide a systems-level understanding of the actions of EGFR signaling to inhibit keratinocyte differentiation, providing new insight into the role of EGFR imbalance in skin pathogenesis.