A definite identification of epidermal stem cells is not known and the mechanism of epidermal differentiation is not fully understood. Toward both of these quests, considerable information is available from the research on lineage tracing and clonal growth analysis in the basal layer of the epidermis, on the hair follicle and interfollicular epidermal stem cells, and on Wnt signaling along with its role in developmental patterning and cell differentiation. In this paper, literature on the aforementioned research has been collated and analyzed. In addition, models of basal layer cellular composition and epidermal differentiation have been presented.