Aryl hydrocarbon receptor (AHR) is an important regulator of skin barrier function. It also controls immune-mediated skin responses. The AHR modulates various physiological functions by acting as a sensor that mediates environment–cell interactions, particularly during immune and inflammatory responses. Diverse experimental systems have been used to assess the AHR’s role in skin inflammation, including in vitro assays of keratinocyte stimulation and murine models of psoriasis and atopic dermatitis. Similar approaches have addressed the role of AHR ligands, e.g., TCDD, FICZ, and microbiota-derived metabolites, in skin homeostasis and pathology. Tapinarof is a novel AHR-modulating agent that inhibits skin inflammation and enhances skin barrier function. The topical application of tapinarof is being evaluated in clinical trials to treat psoriasis and atopic dermatitis. In the present review, we summarize the effects of natural and synthetic AHR ligands in keratinocytes and inflammatory cells, and their relevance in normal skin homeostasis and cutaneous inflammatory diseases.