Psoriasis is a common immune‐mediated inflammatory skin disease, caused by disturbed interactions between keratinocytes and immune cells. Chinese medicine shows potential clinical application for its treatment. Liquiritin is a flavone compound extracted from licorice and shows potential antitussive, antioxidant and antiinflammatory effects, and therefore may have potential as a psoriasis therapeutic. The aim of this work was to examine the possible roles that liquiritin may have in treating psoriasis. HaCaT cells were stimulated by TNF‐α with or without liquiritin, harvested for analysis by western blots and RT‐qPCR, and the cellular supernatants were collected and analyzed by ELISA for cytokines. In addition, 4 groups of mice were examined: Normal, Vehicle, LQ‐L and LQ‐H. The mice were sacrificed after 6 days and analyzed using IHC, ELISA, RT‐qPCR and flow cytometry. The results showed that liquiritin could significantly inhibit the progression of psoriasis both in vitro and in vivo. Liquiritin strongly suppressed the proliferation of HaCaT keratinocytes but did not affect cell viability. Moreover, liquiritin alleviated imiquimod‐induced psoriasis‐like skin inflammation and accumulation of Th17 cells and DCs in vivo. In TNF‐α‐induced HaCaT keratinocytes, both protein and mRNA expression levels of inflammatory cytokines were sharply decreased. In imiquimod‐induced mice, the activation of NF‐κB and AP‐1 was reduced after treatment with liquiritin. Collectively, our results show that liquiritin might act as a pivotal regulator of psoriasis via modulating NF‐κB and AP‐1 signal pathways.