Epithelial keratinocyte proliferation is an essential element of wound repair and abnormal epithelial proliferation is an intrinsic element in the skin disorder psoriasis. The factors that trigger epithelial proliferation in these inflammatory processes are incompletely understood. Here we have shown that regenerating islet-derived protein 3- alpha (REG3A) is highly expressed in keratinocytes during psoriasis, wound repair and in imiquimod-induced psoriatic skin lesions. The expression of REG3A by keratinocytes is induced by interleukin-17A (IL-17A) via activation of keratinocyte-encoded IL-17A receptor (IL-17RA) and feeds back on keratinocytes to inhibit terminal differentiation and increase cell proliferation by binding to exostosin-like 3 (EXTL3) followed by activation of phosphatidylinositol 3 kinase (PI3K) and the kinase Akt. In addition to regulation of keratinocyte proliferation and differentiation, REG3A suppresses TLR3-dependent inflammation via the induction of a negative regulator SHP-1 to dephosphorylate TLR3-induced JNK in diabetic skin wounds. These findings reveal that REG3A, a secreted intestinal antimicrobial protein, can promote skin keratinocyte proliferation and regulate wound inflammation. This observation suggests that REG3A may mediate the epidermal hyperproliferation observed in normal wound repair and in psoriasis, or regulate excessive inflammatory responses in diabetic skin wounds.