The interfollicular epidermis regenerates from heterogeneous basal skin cell populations that divide at different rates. It has previously been presumed that infrequently dividing basal cells known as label-retaining cells (LRCs) are stem cells, whereas non-LRCs are short-lived progenitors. Here we employ the H2B-GFP pulse-chase system in adult mouse skin and find that epidermal LRCs and non-LRCs are molecularly distinct and can be differentiated by Dlx1(CreER) and Slc1a3(CreER) genetic marking, respectively. Long-term lineage tracing and mathematical modelling of H2B-GFP dilution data show that LRCs and non-LRCs constitute two distinct stem cell populations with different patterns of proliferation, differentiation and upward cellular transport. During homeostasis, these populations are enriched in spatially distinct skin territories and can preferentially produce unique differentiated lineages. On wounding or selective killing, they can temporarily replenish each other's territory. These two discrete interfollicular stem cell populations are functionally interchangeable and intrinsically well adapted to thrive in distinct skin environments.