Keratinocytes express high levels of 25OHD 1α-hydroxylase (1OHase). The product of this enzyme, 1,25-dihydroxyvitamin D (1,25(OH)₂D), promotes the differentiation of keratinocytes in vitro suggesting an important role for this enzyme in epidermal differentiation. 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^−/−). Heterozygotes for the null allele were bred, and the progeny genotyped by PCR. The epidermis of the 1αOHase^−/− animals and their wild-type littermates (1αOHase^+/+) were examined by histology at the light and electron microscopic level, by immunocytochemistry for markers of differentiation, and by function examining the permeability barrier using transepidermal water loss (TEWL). No gross epidermal phenotype was observed; however, immunocytochemical assessment of the epidermis revealed a reduction in involucrin, filaggrin, and loricrin—markers of differentiation in the keratinocyte and critical for the formation of the cornified envelope. These observations were confirmed at the electron microscopic level, which showed a reduction in the F (containing filaggrin) and L (containing loricrin) granules and a reduced calcium gradient. The functional significance of these observations was tested using TEWL to evaluate the permeability barrier function of the epidermis. Although TEWL was normal in the basal state, following disruption of the barrier using tape stripping, the 1αOHase^−/− animals displayed a markedly delayed recovery of normal barrier function. This delay was associated with a reduction in lamellar body secretion and a failure to reform the epidermal calcium gradient. Thus, the 25OHD 1OHase is essential for normal epidermal differentiation, most likely by producing the vitamin D metabolite, 1,25(OH)₂D, responsible for inducing the proteins regulating calcium levels in the epidermis that are critical for the generation and maintenance of the barrier.