Matriptase/MT-SP1 is a novel tumor-associated type II transmembrane serine protease that is highly expressed in the epidermis, thymic stroma, and other epithelia. A null mutation was introduced into the Matriptase/MT-SP1 gene of mice to determine the role of Matriptase/MT-SP1 in epidermal development and neoplasia. Matriptase/MT-SP1-deficient mice developed to term but uniformly died within 48 h of birth. All epidermal surfaces of newborn mice were grossly abnormal with a dry, red, shiny, and wrinkled appearance. Matriptase/MT-SP1-deficiency caused striking malformations of the stratum corneum, characterized by dysmorphic and pleomorphic corneocytes and the absence of vesicular bodies in transitional layer cells. This aberrant skin development seriously compromised both inward and outward epidermal barrier function, leading to the rapid and fatal dehydration of Matriptase/MT-SP1-deficient pups. Loss of Matriptase/MT-SP1 also seriously affected hair follicle development resulting in generalized follicular hypoplasia, absence of erupted vibrissae, lack of vibrissal hair canal formation, ingrown vibrissae, and wholesale abortion of vibrissal follicles. Furthermore, Matriptase/MT-SP1-deficiency resulted in dramatically increased thymocyte apoptosis, and depletion of thymocytes. This study demonstrates that Matriptase/MT-SP1 has pleiotropic functions in the development of the epidermis, hair follicles, and cellular immune system.