Fanconi anemia (FA) is a recessive genome instability syndrome characterized by heightened cellular sensitivity to DNA damage, aplastic anemia and cancer susceptibility. Leukemias and squamous cell carcinomas (SCCs) are the most predominant FA-associated cancers, with the latter exhibiting markedly early disease onset and aggressiveness. Although studies of hematopoietic cells derived from FA patients have provided much insight into bone marrow deficiencies and leukemogenesis, molecular transforming events in FA-deficient keratinocytes, which are the cell type of origin for SCC, are poorly understood. We describe here the growth and molecular properties of FANCA-deficient versus FANCA-corrected HPV E6/E7 immortalized keratinocytes in monolayer and organotypic epithelial raft culture. In response to DNA damage, FANCA-deficient patient-derived keratinocyte cultures displayed a G2/M phase arrest, senescence and apoptosis. Organotypic raft cultures exhibited DNA repair-associated defects with more 53BP1 foci and TdT-mediated dNTP nick end labeling-positive cells over their corrected counterparts. Interestingly, together with reduced rates of DNA damage, FA correction resulted in a marked decrease in epithelial thickness and the presence of fewer cell layers. The observed FANCA-mediated suppression of hyperplasia correlated with the detection of fewer cells transiting through the cell cycle in the absence of gross differentiation abnormalities or apoptotic differences. Importantly, the knockdown of either FANCA or FANCD2 in HPV-positive keratinocytes was sufficient for increasing epithelial hyperplasia. Our findings support a new role for FA pathways in the maintenance of differentiation-dependent cell cycle exit, with the implication that FA deficiencies may contribute to the high risk of FA patients for developing HPV-associated SCC.