Genetically modified mice are excellent models to study the function of specific genes in skin development and in skin diseases. Using mice with targeted mutations of Rho GTPase genes as example we will demonstrate analysis of skin development and maintenance, wound healing, skin inflammation and tumor formation and show, how mechanistical information can be extracted from these in vivo models. Rho GTPases are major regulators of the actin cytoskeleton, but more recently were found to control also other cellular processes such as proliferation, apoptosis, cell-cell contact, cell polarity and endocytosis. Our investigations with mutant mice reveal important roles for Rho GTPases in the fate decision of hair follicle progenitor cells, in the maintenance of cell-cell contacts, reepithelialization and inflammatory and neoplastic skin diseases.