Squamous cell carcinoma of the skin often arise in areas of field cancerization but the molecular mechanisms that promote field cancerization and transition to invasive tumors is still poorly understood. Although P53 mutations are linked to field cancerization, epidermal p53 inactivation in mice is not sufficient to induce field cancerization. We previously showed that the atypical protein kinase Cι (aPKCι) regulates cell polarity and skin stem cell dynamics, and promotes skin cancer in a DMBA/TPA model. Surprisingly, combined epidermal deletion of aPKCι and p53 (edko) in mice promotes field cancerization and tremendously accelerates squamous cell carcinomas (SCC) formation when compared to p53 loss alone. In human SCCs low epidermal aPKC levels also correlate with poor prognosis for metastasis-free survival, thus identifying a conserved tumor suppressive role for aPKC in skin cancer. By combining RNA Seq with immunofluorescence analysis we found that at postnatal day (P) 21, when proliferation is already increased but without obvious changes yet in edko epidermal architecture, combined loss of aPKCι and p53 creates an inflammatory and hypoxic microenvironment resulting in a 10-fold increase in macrophage numbers. Importantly, depleting macrophages prevented dysplastic keratinocyte hyperplasia and restored epidermal architecture. Molecularly, loss of aPKC/P53 activates epidermal Stat3, which in vivo is essential for hypoxia and macrophage infiltration and drives hyperplasia of dysplastic keratinocytes and SCC. Thus, our results identify epidermal polarity signaling as a gatekeeper of the tumor microenvironment to prevent field cancerization and widespread SCC upon loss of p53.