Merkel cells (MCs) are located in the touch-sensitive area of the epidermis and mediate mechanotransduction in the skin. Whether MCs originate from embryonic epidermal or neural crest progenitors has been a matter of intense controversy since their discovery >130 yr ago. In addition, how MCs are maintained during adulthood is currently unknown. In this study, using lineage-tracing experiments, we show that MCs arise through the differentiation of epidermal progenitors during embryonic development. In adults, MCs undergo slow turnover and are replaced by cells originating from epidermal stem cells, not through the proliferation of differentiated MCs. Conditional deletion of the Atoh1/ Math1 transcription factor in epidermal progenitors results in the absence of MCs in all body locations, including the whisker region. Our study demonstrates that MCs arise from the epidermis by an Atoh1-dependent mechanism and opens new avenues for study of MC functions in sensory perception, neuroendocrine signaling, and MC carcinoma.