The 14-3-3σ (Stratifin; Sfn) is a cell cycle regulator intimately involved in the program of epithelial keratinization. 14-3-3σ is unique in that it is expressed primarily in epithelial cells and is frequently silenced in epithelial cancers. Despite its well-documented role as a cell cycle regulator and as a tumor suppressor, the function of 14-3-3σ in the intricate balance of proliferation and differentiation in epithelial development is poorly understood. A mutation in 14-3-3σ was found to be responsible for the repeated epilation (Er) phenotype. It has previously been shown that Sfn^+/Er mice are characterized by repeated hair loss and regrowth, whereas Sfn^Er/Er mice die at birth displaying severe oral fusions and limb abnormalities as a result of defects in keratinizing epithelia. Here we show that mice heterozygous for the 14-3-3σ mutation have severe defects in hair shaft differentiation, resulting in destruction of the hair shaft during morphogenesis. Furthermore, we report that the interfollicular epidermis and sebaceous glands are hyperproliferative, coincident with expanded nuclear Yap1 (Yes-associated protein 1)—a critical modulator of epidermal stem cell proliferation. We also report that hair follicle stem cells in the bulge cycle abnormally, raising important questions as to the role of 14-3-3σ in the bulge.