Interleukin-38 (IL-38) is strongly associated with chronic inflammatory diseases; however, its role in tumorigenesis is poorly understood. We demonstrated that expression of IL-38, which exhibits high expression in the skin, is downregulated in human cutaneous squamous cell carcinoma and 7,12-dimethylbenzanthracene/12-O-tetradecanoyl phorbol-13-acetate-induced mouse skin tumorigenesis. IL-38 keratinocyte-specific knockout mice displayed suppressed skin tumor formation and malignant progression. Keratinocyte-specific deletion of IL-38 was associated with reduced expression of inflammatory cytokines, leading to reduced myeloid cell infiltration into the local tumor microenvironment. IL-38 is dispensable for epidermal mutagenesis, but IL-38 keratinocyte-specific deletion reduces proliferative gene expression along with epidermal cell proliferation and hyperplasia. Mechanistically, we first demonstrated that IL-38 activates the c-Jun N-terminal kinase (JNK)/activator protein 1 signal transduction pathway to promote the expression of cancer-related inflammatory cytokines and proliferation and migration of tumor cells in an IL-1 receptor-related protein 2 (IL-1Rrp2)-dependent manner. Our findings highlight the role of IL-38 in the regulation of epidermal cell hyperplasia and pro-tumorigenic microenvironment through IL-1Rrp2/JNK and suggest IL-38/IL-1Rrp2 as a preventive and potential therapeutic target in skin cancer.