The lifelong self-renewal of the epidermis is driven by a progenitor cell population with high proliferative potential. To date, the upstream signals that determine this potential have remained largely elusive. Here, we find that insulin and insulin-like growth factor receptors (IR and IGF-1R) determine epidermal proliferative potential and cooperatively regulate interfollicular epidermal morphogenesis in a cell autonomous manner. Epidermal deletion of either IR or IGF-1R or both in mice progressively decreased epidermal thickness without affecting differentiation or apoptosis. Proliferation was temporarily reduced at E17.5 in the absence of IGF-1R but not IR. In contrast, clonogenic capacity was impaired in both IR- and IGF-1R-deficient primary keratinocytes, concomitant with an in vivo loss of keratin 15. Together with a reduction in label-retaining cells in the interfollicular epidermis, this suggests that IR/IGF-1R regulate progenitor cells. The expression of dominant active Rac rescued clonogenic potential of IR/IGF-1R-negative keratinocytes and reversed epidermal thinning in vivo. Our results identify the small GTPase Rac as a key target of epidermal IR/IGF-1R signalling crucial for proliferative potential and interfollicular morphogenesis.