In Drosophila, the grainy head (grh) gene plays a range of key developmental roles through the regulation of members of the cadherin gene family. We now report that mice lacking the grh homologue grainy head-like 1 (Grhl1) exhibit hair and skin phenotypes consistent with a reduction in expression of the genes encoding the desmosomal cadherin, desmoglein 1 (Dsg1). Grhl1-null mice show an initial delay in coat growth, and older mice exhibit hair loss as a result of poor anchoring of the hair shaft in the follicle. The mice also develop palmoplantar keratoderma, analogous to humans with DSG1 mutations. Sequence analysis, DNA binding, and chromatin immunoprecipitation experiments demonstrate that the human and mouse Dsg1 promoters are direct targets of GRHL1. Ultrastructural analysis reveals reduced numbers of abnormal desmosomes in the interfollicular epidermis. These findings establish GRHL1 as an important regulator of the Dsg1 genes in the context of hair anchorage and epidermal differentiation, and suggest that cadherin family genes are key targets of the grainy head-like genes across 700 million years of evolution.