The membrane serine protease matriptase is required for epidermal barrier function, hair formation, and thymocyte development in mice, and dysregulated matriptase expression causes epidermal squamous cell carcinoma. To elucidate the specific functions of matriptase in normal and aberrant epidermal differentiation, we used enzymatic gene trapping combined with immunohistochemical, ultrastructural, and barrier function assays to delineate the spatio-temporal expression and function of matriptase in mouse keratinized tissue development, homeostasis, and malignant transformation. In the interfollicular epidermis, matriptase expression was restricted to postmitotic transitional layer keratinocytes undergoing terminal differentiation. Matriptase was also expressed in keratinizing oral epithelium, where it was required for oral barrier function, and in thymic epithelium. In all three tissues, matriptase colocalized with profilaggrin. In staged embryos, the onset of epidermal matriptase expression coincided with that of profilaggrin expression and acquisition of the epidermal barrier. In marked contrast to stratifying keritinized epithelium, matripase expression commenced already in undifferentiated and rapidly proliferating profilaggrin-negative matrix cells and displayed hair growth cycle-dependent expression. Exposure of the epidermis to carcinogens led to the gradual appearance of matriptase in a keratin-5-positive proliferative cell compartment during malignant progression. Combined with previous studies, these data suggest that matriptase has diverging functions in the genesis of stratified keratinized epithelium, hair follicles, and squamous cell carcinoma.