Rac1, a member of the Rho family of guanosine triphosphatases (GTPases), is a pleiotropic regulator of many cellular processes, including the cell cycle, cell-cell adhesion, and motility, as well as a key regulator of epithelial differentiation. Aznar Benitah et al. (see the Perspective by Dotto and Cotsarelis) show that Rac1 is expressed in the proliferative compartment of mammalian epidermis. In mice, conditional deletion of Rac1 produces a rapid transient proliferation of cells, followed by the depletion of epidermal stem cells and by a corresponding increase in cell differentiation. For its effect on the stem cell compartment, Rac1 acts through negative regulation of c-Myc. Thus, as Rac1 is down-regulated, cells can no longer adhere tightly to the substratum, which leads to an inefficient relay of signals from the stem cell niche and subsequent cell differentiation.