Human prenatal skin is populated by innate immune cells including macrophages, and whether they act solely in immunity or have additional functions in morphogenesis is unclear. We assembled the first comprehensive multi-omic reference atlas of prenatal human skin (7-16 post-conception weeks), combining single cell and spatial transcriptomic data, to characterise the skin's microenvironmental cellular organisation. This revealed that crosstalk between non-immune and immune cells underpins formation of hair follicles, has implications for scarless wound healing, and is critical for skin angiogenesis. We benchmarked a skin organoid model, derived from human embryonic stem (ES) and induced pluripotent stem (iPS) cells, against prenatal and adult skin, demonstrating close recapitulation of the epidermal and dermal skin components during hair follicle development. Notably, the skin organoid lacked immune cells and had markedly diminished endothelial cell heterogeneity and quantity. From our in vivo skin cell atlas data, we found that macrophages and macrophage-derived growth factors play a key role in driving endothelial development prenatally. Indeed, vascular network formation was enhanced following transfer of autologous iPS-derived macrophages into both endothelial cell angiogenesis assays and skin organoid cultures. In summary, innate immune cells moonlight as key players in skin morphogenesis beyond their conventional immune roles, a function they achieve via extensive crosstalk with non-immune cells. Finally, we leveraged our human prenatal skin cell atlas to further our understanding of the pathogenesis of genetic hair and skin disorders.