Oil-secreting sebaceous glands (SGs) are critical for proper skin function; however, it remains unclear how different factors act together to modulate SG stem cells. Here, we provide functional evidence that each SG lobe is serviced by its own dedicated stem cell population. Upon ablating Notch signaling in different skin subcompartments, we find that this pathway exerts dual counteracting effects on SGs. Suppressing Notch in SG progenitors traps them in a hybrid state where stem and differentiation features become intermingled. In contrast, ablating Notch outside of the SG stem cell compartment indirectly drives SG expansion. Finally, we report that a K14:K5→K14:K79 keratin shift occurs during SG differentiation. Deleting K79 destabilizes K14 in sebocytes, and attenuates SGs and eyelid meibomian glands, leading to corneal ulceration. Altogether, our findings demonstrate that SGs integrate diverse signals from different niches and suggest that mutations incurred within one stem cell compartment can indirectly influence another.