There are four known stearoyl-CoA desaturase (SCD) enzyme isoforms in mouse and two in humans that are required for the biosynthesis of monounsaturated fatty acids, mainly oleate. SCD1 isoform plays a role in the regulation of energy metabolism and lipid synthesis, but the roles of the other SCD isoforms have not been investigated. Here we show that the SCD2 isoform is important in lipid synthesis in early development and is required for survival. SCD2-deficient (Scd2^-/-) neonatal mice have a skin permeability barrier defect and a specific repartitioning of linoleic acid from epidermal acylceramide species into phospholipids. SCD2 expression is high in liver of wild-type mouse embryos and neonates between embryonic day 18.5 and 21 days of age and is decreased in adult mice. SCD1 expression, on the other hand, is induced after weaning. The liver, skin, and plasma triglyceride contents are decreased in the neonates but are not altered in the adult Scd2^-/- mice. These results indicate that, although SCD1 expression is important in adult mice, SCD2 is crucial in the synthesis of monounsaturated fatty acids that are required for maintaining normal epidermal permeability barrier function and biosynthesis of lipids during early skin and liver development.