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 characterized by chemokine upregulation 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 interleukin-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.