Psoriasis is an inflammatory disorder characterized by keratinocyte hyper‐proliferation and Th17‐type immune responses. However, the roles of bioactive lipids and the regulation of their biosynthesis in this chronic skin disease are not fully understood. Herein, we show that group IVE cytosolic phospholipase A2 (cPLA2ε/PLA2G4E) plays a counterregulatory role against psoriatic inflammation by producing the anti‐inflammatory lipid N‐acylethanolamine (NAE). Lipidomics analysis of mouse skin revealed that NAE species and their precursors (N‐acyl‐phosphatidylethanolamine and glycerophospho‐N‐acylethanolamine) were robustly increased in parallel with the ongoing process of imiquimod (IMQ)‐induced psoriasis, accompanied by a marked upregulation of cPLA2ε in epidermal keratinocytes. Genetic deletion of cPLA2ε exacerbated IMQ‐induced ear swelling and psoriatic marker expression, with a dramatic reduction of NAE‐related lipids in IMQ‐treated, and even normal, skin. Stimulation of cultured human keratinocytes with psoriatic cytokines concomitantly increased PLA2G4E expression and NAE production, and supplementation with NAEs significantly attenuated the cytokine‐induced upregulation of the psoriatic marker S100A9. Increased expression of cPLA2ε was also evident in the epidermis of psoriatic patients. These findings reveal for the first time the in vivo role of cPLA2ε, which is highly induced in the keratinocytes of the psoriatic skin, promotes the biosynthesis of NAE‐related lipids, and contributes to limiting psoriatic inflammation.