DNA polymerase ζ (polζ) is critical for bypass of DNA damage and the associated mutagenesis, but also has unique functions in mammals. It is required for embryonic development and for viability of hematopoietic cells, but, paradoxically, skin epithelia appear to survive polζ deletion. We wished to determine whether polζ functions in a tissue-specific manner and how polζ status influences skin tumorigenesis. Mice were produced in which Rev3L (the catalytic subunit of polζ) was deleted in tissues expressing keratin 5. Efficient epidermal deletion of Rev3L was tolerated but led to skin and hair abnormalities, accompanied by evidence of DNA breaks. Unchallenged mice developed tumors in keratin 5-expressing tissues with age, consistent with the chromosomal instability accompanying a polζ defect. Unexpectedly, mice with the Rev3L deletion were much more sensitive to UVB radiation than mice defective in other DNA repair genes. Following irradiation, polζ-defective mice failed to mount skin-regenerative responses and responded to stress by mobilizing melanocytes to the epidermis. However, they did not develop skin tumors after chronic UVB irradiation. To determine the proliferative potential of polζ-deficient skin epithelia, keratinocytes were isolated and examined. These keratinocytes harbored chromosomal gaps and breaks and exhibited a striking proliferation defect. These results can be unified by a model in which slowly dividing cells accumulate replication-associated DNA breaks but otherwise survive Rev3L deletion, but functional polζ is essential for responses requiring rapid proliferation, both in cell culture and in vivo. The results reveal a biological role for mammalian polζ in tolerating DNA damage and enabling proliferative responses in vivo.