AP-2 transcription factors regulate ectodermal development, but their roles in epidermal homeostasis in adult skin are unknown. We find that AP-2α is the predominant AP-2 family member in adult epidermis, followed by AP-2β. Through inactivation of AP-2α, AP-2β, or both in keratinocytes, we assessed the effects of a gradient of epidermal AP-2 activity on skin function. We find that (i) loss of AP-2β in keratinocytes is compensated for by AP-2α, (ii) loss of AP-2α impairs terminal keratinocyte differentiation and hair morphogenesis, and (iii) the combined loss of AP-2α/AP-2β results in more severe skin and hair abnormalities. Keratinocyte differentiation defects precede progressive neutrophilic skin inflammation. Inducible inactivation of AP-2α/AP-2β in the adult phenocopies these manifestations. Transcriptomic analyses of epidermis lacking AP-2α or AP-2α/AP-2β in keratinocytes demonstrate a terminal keratinocyte differentiation defect with upregulation of alarmin keratins and of several immune pathway regulators. Moreover, our analyses suggest a key role of reduced AP-2α-dependent gene expression of CXCL14 and the keratin 15 gene K15 as an early pathogenic event toward the manifestation of skin inflammation. Thus, AP-2α and AP-2β are critical regulators of epidermal homeostasis in adult skin.