The stratum corneum (SC), the outermost layer of the epidermis, acts as a barrier against the external environment. It is hydrated by endogenous humectants to avoid desiccation. However, the molecular mechanisms of SC hydration remain unclear. We report that skin-specific retroviral-like aspartic protease (SASPase) deficiency in hairless mice resulted in dry skin and a thicker and less hydrated SC with an accumulation of aberrantly processed profilaggrin, a marked decrease of filaggrin, but no alteration in free amino acid composition, compared with control hairless mice. We demonstrated that recombinant SASPase directly cleaved a linker peptide of recombinant profilaggrin. Furthermore, missense mutations were detected in 5 of 196 atopic dermatitis (AD) patients and 2 of 28 normal individuals. Among these, the V243A mutation induced complete absence of protease activity in vitro, while the V187I mutation induced a marked decrease in its activity. These findings indicate that SASPase activity is indispensable for processing profilaggrin and maintaining the texture and hydration of the SC. This provides a novel approach for elucidating the complex pathophysiology of atopic dry skin.