During epithelial tissue morphogenesis, developmental progenitor cells undergo dynamic adhesive and cytoskeletal remodeling to trigger proliferation and migration. Transcriptional mechanisms that restrict such a mild form of epithelial plasticity to maintain lineage-restricted differentiation in committed epithelial tissues are poorly understood. Here, we report that simultaneous ablation of transcriptional repressor-encoding Ovol1 and Ovol2 results in expansion and blocked terminal differentiation of embryonic epidermal progenitor cells. Conversely, mice overexpressing Ovol2 in their skin epithelia exhibit precocious differentiation accompanied by smaller progenitor cell compartments. We show that Ovol1/Ovol2-deficient epidermal cells fail to undertake α-catenin-driven actin cytoskeletal reorganization and adhesive maturation and exhibit changes that resemble epithelial-to-mesenchymal transition (EMT). Remarkably, these alterations and defective terminal differentiation are reversed upon depletion of EMT-promoting transcriptional factor Zeb1. Collectively, our findings reveal Ovol-Zeb1-α-catenin sequential repression and highlight Ovol1 and Ovol2 as gatekeepers of epithelial adhesion and differentiation by inhibiting progenitor-like traits and epithelial plasticity.