Atopic Dermatitis (AD) is a T cell-mediated chronic skin disease and is associated with altered skin barrier integrity. Infants with mutations in genes involved in tissue barrier fitness are predisposed towards inflammatory diseases, but most do not develop or sustain the diseases, suggesting that there exist regulatory immune mechanisms to prevent aberrant inflammation. The absence of one single murine dermal cell type, the innate neonatal-derived IL-17 producing gammadelta T (Tgammadelta17) cells, from birth resulted in spontaneous, highly penetrant AD with many of the major hallmarks of human AD. In Tgammadelta17 cell-deficient mice, basal keratinocyte transcriptome was altered months in advance of AD induction. Tgammadelta17 cells respond to skin commensal bacteria and the fulminant disease in their absence was driven by skin commensal bacteria dysbiosis. AD in this model was characterized by highly expanded dermal alphabeta T clonotypes that produce the type three cytokines, IL-17 and IL-22. These results demonstrate that neonatal Tgammadelta17 cells are innate skin regulatory T cells that are critical for skin homeostasis, and that IL-17 has dual homeostatic and inflammatory function in the skin.