Keratinocytes express high levels of 25OHD 1α-hydroxylase (1OHase). The product of this enzyme, 1,25(OH)₂D, promotes the differentiation of keratinocytes in vitro. To test whether 1OHase activity is essential for keratinocyte differentiation in vivo we examined the differentiation process in mice null for the expression of the 1αOHase gene (1αOHase^−/−) by light and electron microscopy, by immunocytochemistry for markers of differentiation, by ion capture cytochemistry for calcium localization, and by function using transepidermal water loss (TEWL) to assess barrier integrity. Levels of involucrin, filaggrin, and loricrin—markers of differentiation in the keratinocyte and critical for the formation of the cornified envelope—were reduced in the epidermis of 1αOHase^−/− mice. Calcium in the outer epidermis was reduced with loss of the calcium gradient from stratum basale to stratum granulosum. TEWL was normal in the resting state, but following disruption of the barrier, 1αOHase^−/− mice had a markedly prolonged recovery of barrier function associated with a reduction in lamellar body secretion and a failure to reform the calcium gradient. Thus 1,25(OH)₂D is essential for normal epidermal differentiation, most likely by inducing the proteins and mediating the calcium signaling in the epidermis required for the generation and maintenance of the barrier.