P-cadherin is a member of the classical cadherin family that forms the transmembrane core of adherens junctions. Recently, mutations in the P-cadherin gene (CDH3) have been shown to cause two inherited diseases in humans: hypotrichosis with juvenile macular dystrophy (HJMD) and ectodermal dysplasia, ectrodactyly, macular dystrophy (EEM syndrome). The common features of both diseases are sparse hair and macular dystrophy of the retina, while only EEM syndrome shows the additional finding of split hand/foot malformation (SHFM). We identified five consanguineous Pakistani families with either HJMD or EEM syndrome, and detected pathogenic mutations in the CDH3 gene of all five families. In order to define the role of P-cadherin in hair follicle and limb development, we performed expression studies on P-cadherin in the mouse embryo, and demonstrated the predominant expression of P-cadherin not only in the hair follicle placode, but also at the apical ectodermal ridge (AER) of the limb bud. Based on the evidence that mutations in the p63 gene also result in hypotrichosis and SHFM, and that the expression patterns of p63 and P-cadherin overlap in the hair follicle placode and AER, we postulated that CDH3 could be a direct transcriptional target gene of p63. We performed promoter assays and ChIP, which revealed that p63 directly interacts with two distinct regions of the CDH3 promoter. We conclude that P-cadherin is a newly defined transcriptional target gene of p63, with a crucial role in hair follicle morphogenesis as well as the AER during limb bud outgrowth in humans, whereas it is not required for either in mice.