Glucocorticoids (GC), synthesized by the 11-hydroxylase (Cyp11b1), control excessive inflammation through immunosuppressive actions. The skin was proposed to regulate homeostasis by autonomous GC production in keratinocytes. However, their immunosuppressive capacity and clinical relevance remain unexplored. Here, we demonstrate the potential of skin-derived GC and their role in the regulation of physiological and prevalent inflammatory skin conditions. In line with 11-hydroxylase deficiency in human inflammatory skin disorders, genetic in vivo Cyp11b1 ablation and long-term GC deficiency in keratinocytes primed the murine skin immune system resulting in spontaneous skin inflammation. Deficient skin GC in experimental models for inflammatory skin disorders led to exacerbated contact hypersensitivity and psoriasiform skin inflammation accompanied by decreased regulatory T cells and the involvement of unconventional T cells. Our findings provide insights on how skin homeostasis and pathology are critically regulated by keratinocyte-derived GC, emphasizing the immunoregulatory potential of endogenous GC in the regulation of epithelial immune microenvironment.