The transcription factor Ets1 is expressed at low levels in epidermal keratinocytes under physiological conditions, but is over-expressed in cutaneous squamous cell carcinoma (SCC). We previously showed that over-expression of Ets1 in differentiated keratinocytes of the skin leads to significant pro-tumorigenic alterations. Here, we further extend these studies by testing the effects of over-expressing Ets1 in the proliferative basal keratinocytes of the skin, which includes the putative epidermal stem cells. We show that induction of the Ets1 transgene in the basal layer of skin during embryogenesis results in epidermal hyperplasia and impaired differentiation accompanied by attenuated expression of spinous and granular layer markers. A similar hyper-proliferative skin phenotype was observed when the transgene was induced in the basal layer of the skin of adult mice leading to hair loss and open sores. The Ets1-mediated phenotype is accompanied by a variety of changes in gene expression including alterations in Notch signaling, a crucial mediator of normal skin differentiation. Finally, we show that Ets1 disrupts Notch signaling in part via its ability to upregulate ΔNp63, an established transcriptional repressor of several of the Notch receptors. Given the established tumor suppressive role for Notch signaling in skin tumorigenesis, the demonstrated ability of Ets1 to interfere with this signaling pathway may be important in mediating its pro-tumorigenic activities.