Anchored cells of the basal epidermis constantly undergo proliferation in an overcrowded environment. An important regulator of epidermal proliferation is YAP, which can be controlled by both cell–matrix and cell–cell interactions. Here, we report that THY1, a GPI-anchored protein, inhibits epidermal YAP activity through converging molecular mechanisms. THY1 deficiency leads to increased adhesion by activating the integrin-β1–SRC module. Notably, regardless of high cellular densities, the absence of THY1 leads to the dissociation of an adherens junction complex that enables the release and translocation of YAP. Due to increased YAP-dependent proliferation, Thy1–/– mice display enhanced wound repair and hair follicle regeneration. Taken together, our work reveals THY1 as a crucial regulator of cell–matrix and cell–cell interactions that controls YAP activity in skin homeostasis and regeneration.