Chromatin modifiers play critical roles in epidermal development, but the functions of histone deacetylases in this context are poorly understood. We find that the class I HDAC, HDAC3, is expressed broadly in embryonic epidermis. To delineate its roles in epidermal development, we have employed loss of function genetic analyses in mice. We show that HDAC3 is required for its orderly stepwise stratification. Stability of HDAC3 protein in vivo is reliant on NCoR and SMRT, which function redundantly in epidermal development. However, point mutations in the NCoR and SMRT Deacetylase Activating Domains, which are required for HDAC3’s enzymatic function, permit normal stratification, indicating that HDAC3’s roles in this context are independent of its histone deacetylase activity. HDAC3 functions both in conjunction with, and independent of, KLF4 to repress premature expression of different sets of terminal differentiation genes and suppresses expression of inflammatory cytokines through a RelA-dependent mechanism. These data identify HDAC3 as a hub coordinating multiple aspects of epidermal barrier acquisition.