Human autosomal recessive ichthyosis with hypotrichosis (ARIH) is an inherited disorder recently linked to homozygosity for a point mutation in the ST14 gene that causes a G827R mutation in the matriptase serine protease domain (G216 in chymotrypsin numbering). Here we show that human G827R matriptase has strongly reduced proteolytic activity toward small molecule substrates, as well as toward its candidate epidermal target, prostasin. To further investigate the possible contribution of low matriptase activity to ARIH, we generated an ST14 hypomorphic mouse strain that displays a 100-fold reduction in epidermal matriptase mRNA levels. Interestingly, unlike ST14 null mice, ST14 hypomorphic mice were viable and fertile but displayed a spectrum of abnormalities that strikingly resembled ARIH. Thus, ST14 hypomorphic mice developed hyperproliferative and retention ichthyosis with impaired desquamation, hypotrichosis with brittle, thin, uneven, and sparse hair, and tooth defects. Biochemical analysis of ST14 hypomorphic epidermis revealed reduced prostasin proteolytic activation and profilaggrin proteolytic processing, compatible with a primary role of matriptase in this process. This work strongly indicates that reduced activity of a matriptase-prostasin proteolytic cascade is the etiological origin of human ARIH and provides an important mouse model for the exploration of matriptase function in ARIH, as well as multiple other physiological and pathological processes.