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.