The MDM2 oncogene is overexpressed in 5–10% of human tumours. Its major physiological role is to inhibit the tumour suppressor p53. However, MDM2 has p53-independent effects on differentiation and does not predispose to tumorigenesis when it is expressed in the granular layer of the epidermis. These unexpected properties of MDM2 could be tissue specific or could depend on the differentiation state of the cells. Strikingly, we found that MDM2 has p53-dependent effects on differentiation, proliferation and apoptosis when it is expressed in the less differentiated basal layer cells. MDM2 inhibits UV induction of p53, the cell cycle inhibitor p21 WAF1/CIP1 and apoptosis (‘sunburn cells’). Importantly, MDM2 increases papilloma formation induced by chemical carcinogenesis and predisposes to the appearance of premalignant lesions and squamous cell carcinomas. p53 has a natural role in the protection against UV damage in the basal layer of the epidermis. Our results show that MDM2 predisposes to tumorigenesis when expressed at an early stage of differentiation, and provide a mouse model of MDM2 tumorigenesis relevant to p53's tumour suppressor functions.