Abstract Loss of sensory innervation delays wound healing and administration of the neuropeptide substance P improves re-epithelialization. Keratinocyte hyperproliferation post-wounding may result from symmetric stem cell (SC) self-renewal, asymmetric SC self-renewal, committed progenitor divisions, or a combination of these. However, the effects of sensory denervation and of neuropeptides on SC proliferation are not known. Here we show that early after wounding both asymmetric and symmetric SC self-renewal increase, without significant committed progenitor (CP) activation. Decreased sensory innervation is associated with a decrease in both SC and CP proliferation. Based on previous work showing that substance P is decreased in capsaicin-treated mice and improves wound healing in normal skin, we examined the effects of substance P on SC and CP proliferation during wound healing. Substance P restored asymmetric SC proliferation in skin with decreased sensory innervation, both at baseline and following wounding. Epidermis with decreased sensory innervation was severely thinned. Consistent with this, substance P-induced asymmetric SC proliferation resulted in increased stratification in skin with both normal and decreased innervation. Lapatinib prevented the substance P-induced increase in asymmetric SC divisions in murine epidermis, as well as the increase in epidermal stratification, suggesting that asymmetric SC divisions are required for epidermal stratification.