MicroRNAs (miRNAs) are short, single-stranded, noncoding RNAs that play important roles in the regulation of gene expression. We previously identified a characteristic miRNA expression profile in psoriasis, distinct from that of healthy skin. One of the most downregulated miRNAs in psoriasis skin was microRNA-125b (miR-125b). In this study, we aimed to identify the potential role(s) of miR-125b in psoriasis pathogenesis. In situ hybridization results showed that the major cell type responsible for decreased miR-125b levels in psoriasis lesions was the keratinocyte. Overexpression of miR-125b in primary human keratinocytes suppressed proliferation and induced the expression of several known differentiation markers. Conversely, inhibition of endogenous miR-125b promoted cell proliferation and delayed differentiation. Fibroblast growth factor receptor 2 (FGFR2) was identified as one of the direct targets for suppression by miR-125b by luciferase reporter assay. The expression of miR-125b and FGFR2 was inversely correlated in both transfected keratinocytes and in psoriatic skin. Knocking down FGFR2 expression by siRNA suppressed keratinocyte proliferation, but did not enhance differentiation. Altogether, our results demonstrate a role for miR-125b in the regulation of keratinocyte proliferation and differentiation, partially through the regulation of FGFR2. Loss of miR-125b in psoriasis skin may contribute to hyperproliferation and aberrant differentiation of keratinocytes.