Although the principles that balance stem cell self-renewal and differentiation in normal tissue homeostasis are beginning to emerge, it is still unclear whether cancer cells with tumour initiating potential are similarly governed, or whether they have acquired distinct mechanisms to sustain self-renewal and long-term tumour growth. Here we show that the transcription factor Sox2, which is not expressed in normal skin epithelium and is dispensable for epidermal homeostasis, marks tumour initiating cells (TICs) in cutaneous squamous cell carcinomas (SCCs). We demonstrate that Sox2 is required for SCC growth in mouse and human, where it enhances Nrp1/Vegf signalling to promote the expansion of TICs along the tumour–stroma interface. Our findings suggest that distinct transcriptional programmes govern self-renewal and long-term growth of TICs and normal skin epithelial stem and progenitor cells. These programmes present promising diagnostic markers and targets for cancer-specific therapies.