The transcription factor p63 (Trp63) plays a key role in homeostasis and regeneration of the skin. The p63 gene is transcribed from dual promoters, generating TAp63 isoforms with growth suppressive functions and dominant-negative ΔNp63 isoforms with opposing properties. p63 also encodes multiple carboxy (C)-terminal variants. Although mutations of C-terminal variants have been linked to the pathogenesis of p63-associated ectodermal disorders, the physiological role of the p63 C-terminus is poorly understood. We report here that deletion of the p63 C-terminus in mice leads to ectodermal malformation and hypoplasia, accompanied by a reduced proliferative capacity of epidermal progenitor cells. Notably, unlike the p63-null condition, we find that p63 C-terminus deficiency promotes expression of the cyclin-dependent kinase inhibitor p21^Waf1/Cip1 (Cdkn1a), a factor associated with reduced proliferative capacity of both hematopoietic and neuronal stem cells. These data suggest that the p63 C-terminus plays a key role in the cell cycle progression required to maintain the proliferative potential of stem cells of many different lineages. Mechanistically, we show that loss of Cα, the predominant C-terminal p63 variant in epithelia, promotes the transcriptional activity of TAp63 and also impairs the dominant-negative activity of ΔNp63, thereby controlling p21^Waf1/Cip1 expression. We propose that the p63 C-terminus links cell cycle control and the proliferative potential of epidermal progenitor cells via mechanisms that equilibrate TAp63 and ΔNp63 isoform function.