The epidermis of the skin and skin appendages, such as nails, hair and sebaceous glands, depend on a balance of cell proliferation and terminal differentiation in order to fulfill their functions at the interface of the body and the environment. The differentiation of epithelial cells of the skin, commonly referred to as keratinocytes, involves major remodeling processes that generate metabolically inactive cell remnants serving as building blocks of the epidermal stratum corneum, nail plates and hair shafts. Only sebaceous gland differentiation results in cell disintegration and holocrine secretion. A series of studies performed in the past decade have revealed that the lysosome-dependent intracellular degradation mechanism of autophagy is active during keratinocyte differentiation, and the blockade of autophagy significantly alters the properties of the differentiation products. Here, we present a model for the autophagy-mediated degradation of organelles and cytosolic proteins as an important contributor to cellular remodeling in keratinocyte differentiation. The roles of autophagy are discussed in comparison to alternative intracellular degradation mechanisms and in the context of programmed cell death as an integral end point of epithelial differentiation.