Extracellular calcium is a major regulator of keratinocyte differentiation in vitro and appears to play that role in vivo, but the mechanism is unclear. We have previously demonstrated that, following calcium stimulation, PIP5K1α is recruited by the E-cadherin-β-catenin complex to the plasma membrane where it provides the substrate PIP2 for both PI3K and PLC-γ1. This signaling pathway is critical for calcium-induced generation of second messengers including IP3 and intracellular calcium and keratinocyte differentiation. In this study, we explored the upstream regulatory mechanism by which calcium activates PIP5K1α and the role of this activation in calcium-induced keratinocyte differentiation. We found that treatment of human keratinocytes in culture with calcium resulted in an increase in serine dephosphorylation and PIP5K1α activation. PP1 knockdown blocked extracellular calcium-induced increase in serine dephosphorylation and activity of PIP5K1α and induction of keratinocyte differentiation markers. Knockdown of PLC-γ1, the downstream effector of PIP5K1α, blocked upstream dephosphorylation and PIP5K1α activation induced by calcium. Coimmunoprecipitation revealed calcium induced recruitment of PP1 to the E-cadherin-catenin-PIP5K1α complex in the plasma membrane. These results indicate that PP1 is recruited to the extracellular calcium-dependent E-cadherin-catenin-PIP5K1α complex in the plasma membrane to activate PIP5K1α, which is required for PLC-γ1 activation leading to keratinocyte differentiation.