Appropriate development of stratified, squamous, keratinizing epithelia, such as the epidermis and oral epithelia, generates an outer protective permeability barrier that prevents water loss, entry of toxins, and microbial invasion. During embryogenesis, the immature ectoderm initially consists of a single layer of undifferentiated, cuboidal epithelial cells that stratifies to produce an outer layer of flattened periderm cells of unknown function. Here, we determined that periderm cells form in a distinct pattern early in embryogenesis, exhibit highly polarized expression of adhesion complexes, and are shed from the outer surface of the embryo late in development. Mice carrying loss-of-function mutations in the genes encoding IFN regulatory factor 6 (IRF6), IκB kinase-α (IKKα), and stratifin (SFN) exhibit abnormal epidermal development, and we determined that mutant animals exhibit dysfunctional periderm formation, resulting in abnormal intracellular adhesions. Furthermore, tissue from a fetus with cocoon syndrome, a lethal disorder that results from a nonsense mutation in IKKA, revealed an absence of periderm. Together, these data indicate that periderm plays a transient but fundamental role during embryogenesis by acting as a protective barrier that prevents pathological adhesion between immature, adhesion-competent epithelia. Furthermore, this study suggests that failure of periderm formation underlies a series of devastating birth defects, including popliteal pterygium syndrome, cocoon syndrome, and Bartsocas-Papas syndrome.