The transcription factor Ets1 is normally expressed in the proliferative layer of stratified epithelium, but expression of Ets1 is significantly upregulated in squamous cell carcinomas. How elevated levels of Ets1 impact tumor initiation and progression is not well understood. To determine the biological consequences of overexpression of Ets1, we developed a transgenic mouse model that allows induction of Ets1 expression in keratinocytes of stratified epithelium in a regulatable fashion. Induction of Ets1 during embryonic development results in a dramatic alteration in epidermal structure and function by suppressing the expression of multiple stratum corneum constituents, while at the same time inducing expression of EGF ligands, AP1 transcription factors and matrix metalloproteases. Interestingly, expression of certain immune-related genes, including defensins, chemokines and cytokines was increased as well, suggesting a possible role for immune dysregulation in the promotion of squamous dysplasia. Experiments using cultured mouse keratinocytes indicate that Ets1 can induce expression of some of these mediators in a cell-intrinsic fashion. Collectively, our data reveal that elevated expression of Ets1 has a much broader array of pro-tumorigenic effects on epithelial cells than previously appreciated.