Ovol2 belongs to the Ovo family of evolutionarily conserved zinc finger transcription factors that act downstream of key developmental signaling pathways including Wg/Wnt and BMP/TGF-beta. We previously reported Ovol2 expression in the basal layer of epidermis, where epidermal stem/progenitor cells reside. In this work, we use HaCaT human keratinocytes to investigate the cellular and molecular functions of Ovol2. We show that depletion of Ovol2 leads to transient cell expansion but a loss of cells with long term proliferation potential. Mathematical modeling and experimental findings suggest that both faster cycling and precocious withdrawal from the cell cycle underlie this phenotype. Ovol2 depletion also accelerates extracellular signal-induced terminal differentiation in two- and three-dimensional culture models. By chromatin immunoprecipitation, luciferase reporter, and functional rescue assays, we demonstrate that Ovol2 directly represses two critical downstream targets, c-Myc and Notch1, thereby suppressing keratinocyte transient proliferation and terminal differentiation, respectively. These findings shed light on how an epidermal cell maintains a proliferation-competent and differentiation-resistant state.