The atypical protein kinase C (aPKC) is a key regulator of polarity and cell fate in lower organisms. However, whether mammalian aPKCs control stem cells and fate in vivo is not known. Here we show that loss of aPKCλ in a self-renewing epithelium, the epidermis, disturbed tissue homeostasis, differentiation, and stem cell dynamics, causing progressive changes in this tissue. This was accompanied by a gradual loss of quiescent hair follicle bulge stem cells and a temporary increase in proliferating progenitors. Lineage tracing analysis showed that loss of aPKCλ altered the fate of lower bulge/hair germ stem cells. This ultimately led to loss of proliferative potential, stem cell exhaustion, alopecia, and premature aging. Inactivation of aPKCλ produced more asymmetric divisions in different compartments, including the bulge. Thus, aPKCλ is crucial for homeostasis of self-renewing stratifying epithelia, and for the regulation of cell fate, differentiation, and maintenance of epidermal bulge stem cells likely through its role in balancing symmetric and asymmetric division.