Psoriasis is a common inflammatory skin disease involving a cross‐talk between epidermal and immune cells. The role of specific epidermal stem cell populations, including hair follicle stem cells (HF‐SCs) in psoriasis is not well defined. Here, we show reduced expression of c‐JUN and JUNB in bulge HF‐SCs in patients with scalp psoriasis. Using lineage tracing in mouse models of skin inflammation with inducible deletion of c‐Jun and JunB, we found that mutant bulge HF‐SCs initiate epidermal hyperplasia and skin inflammation. Mechanistically, thymic stromal lymphopoietin (TSLP) was identified in mutant cells as a paracrine factor stimulating proliferation of neighboring non‐mutant epidermal cells, while mutant inter‐follicular epidermal (IFE) cells are lost over time. Blocking TSLP in psoriasis‐like mice reduced skin inflammation and decreased epidermal proliferation, VEGFα expression, and STAT5 activation. These findings unravel distinct roles of HF‐SCs and IFE cells in inflammatory skin disease and provide novel mechanistic insights into epidermal cell interactions in inflammation. Synopsis Lineage tracing in models of skin inflammation reveals that thymic stromal lymphopoietin (TSLP) activates pro‐inflammatory cues in mutant hair follicle stem cells (HF‐SCs) and keratinocytes (KCs) (1). Primed non‐mutant HF‐SCs also produce TSLP, thus contributing to the disease (2). Scalp psoriasis was associated with a reduction of c‐JUN/JUNB in bulge hair follicle stem cells (HF‐SCs) in psoriatic patients. Specific deletion of c‐Jun/JunB in bulge HF‐SCs (mutantGFP HF‐SCs) was sufficient for the development of psoriasis‐like disease in mice. Keratinocytes derived from mutantGFPHF‐SCs survived, while keratinocytes from mutantGFP inter‐follicular epidermal cells (IFE) were lost during psoriasis progression. TSLP was an important mediator for epidermal hyper‐proliferation and pro‐inflammatory signaling in keratinocytes. Neutralization with anti‐TSLP reduced epidermal cell proliferation and psoriasis‐like progression in mice. TSLP was highly expressed in the epidermis and hair follicles of scalp psoriasis. Lineage tracing in models of skin inflammation reveals that thymic stromal lymphopoietin (TSLP) activates pro‐inflammatory cues in mutant hair follicle stem cells (HF‐SCs) and keratinocytes (KCs). Primed non‐mutant HF‐SCs also produce TSLP, thus contributing to the disease.