Transcriptional control by beta-catenin and lymphoid enhancer-binding factor 1 (LEF1)/T cell factor regulates proliferation in stem cells and tumorigenesis. Here we provide evidence that transcriptional co repressor homeodomain interacting protein kinase 2 (HIPK2) controls the number of stem and progenitor cells in the skin and the susceptibility to develop squamous cell carcinoma. Loss of HIPK2 leads to increased proliferative potential, more rapid G1-S transition in cell cycle, and expansion of the epidermal stem cell compartment. Among the critical regulators of G1-S transition in the cell cycle, only cyclin D1 is selectively up-regulated in cells lacking HIPK2. Conversely, overexpression of HIPK2 suppresses LEF1/beta-catenin-mediated transcriptional activation of cyclin D1 expression. However, deletion of the C-terminal YH domain of HIPK2 completely abolishes its ability to recruit another transcriptional corepressor CtBP and suppress LEF1/beta-catenin-mediated transcription. To determine whether loss of HIPK2 leads to increased susceptibility to tumorigenesis, we treat wild-type, Hipk2+/-, andHipk2-/- mice with the two-stage carcinogenesis protocol. Our results indicate that more skin tumors are induced in Hipk2+/- and Hipk2-/- mutants, with most of the tumors showing shortened incubation time and malignant progression. Together, our results indicate that HIPK2 is a tumor suppressor that controls proliferation by antagonizing LEF1/beta-catenin-mediated transcription. Loss of HIPK2 synergizes with activation of H-ras to induce tumorigenesis.