Harlequin Ichthyosis (HI) is a severe skin disease which leads to neonatal death in approximately 50% of cases. It is the result of mutations in ABCA12, a protein that transports lipids required to establish the protective skin barrier needed after birth. To better understand the life-threatening newborn HI phenotype we analysed the developing epidermis for consequences of lipid dysregulation in mouse models. We observed a pro-inflammatory signature which was characterised by chemokine up-regulation in embryonic skin which is distinct from that seen in other types of ichthyosis. Inflammation also persisted in grafted HI skin. To examine the contribution of inflammation to disease development we overexpressed IL-37b to globally suppress fetal inflammation, observing considerable improvements in keratinocyte differentiation. These studies highlight inflammation as an unexpected contributor to HI disease development in utero, and suggest that inhibiting inflammation may reduce disease severity.