Despite its prevalence, the molecular basis of squamous cell carcinoma (SCC) remains poorly understood. Here, we identify the developmental transcription factor Grhl3 as a potent tumor suppressor of SCC in mice, and demonstrate that targeting of Grhl3 by a miR-21-dependent proto-oncogenic network underpins SCC in humans. Deletion of Grhl3 in adult epidermis evokes loss of expression of PTEN, a direct GRHL3 target, resulting in aggressive SCC induced by activation of PI3K/AKT/mTOR signaling. Restoration of Pten expression completely abrogates SCC formation. Reduced levels of GRHL3 and PTEN are evident in human skin, and head and neck SCC, associated with increased expression of miR-21, which targets both tumor suppressors. Our data define the GRHL3-PTEN axis as a critical tumor suppressor pathway in SCC.