Epithelial morphogenesis generates the shape of the tooth crown. This is driven by patterned differentiation of cells into enamel knots, root-forming cervical loops and enamel-forming ameloblasts. Enamel knots are signaling centers that define the positions of cusp tips in a tooth by instructing the adjacent epithelium to fold and proliferate. Here, we show that the forkhead-box transcription factor Foxi3 inhibits formation of enamel knots and cervical loops and thus the differentiation of dental epithelium in mice. Conditional deletion of Foxi3 (Foxi3 cKO) led to fusion of molars with abnormally patterned shallow cusps. Foxi3 was expressed in the epithelium, and its expression was reduced in the enamel knots and cervical loops and in ameloblasts. Bmp4, a known inducer of enamel knots and dental epithelial differentiation, downregulated Foxi3 in wild-type teeth. Using genome-wide gene expression profiling, we showed that in Foxi3 cKO there was an early upregulation of differentiation markers, such as p21, Fgf15 and Sfrp5. Different signaling pathway components that are normally restricted to the enamel knots were expanded in the epithelium, and Sostdc1, a marker of the intercuspal epithelium, was missing. These findings indicated that the activator-inhibitor balance regulating cusp patterning was disrupted in Foxi3 cKO. In addition, early molar bud morphogenesis and, in particular, formation of the suprabasal epithelial cell layer were impaired. We identified keratin 10 as a marker of suprabasal epithelial cells in teeth. Our results suggest that Foxi3 maintains dental epithelial cells in an undifferentiated state and thereby regulates multiple stages of tooth morphogenesis.