AbstractAutologous skin grafting is a standard treatment for skin defects such as burns. No artificial skin substitutes are functionally equivalent to autologous skin grafts. The cultured epidermis lacks the dermis and does not engraft deep wounds. Although reconstituted skin, which consists of cultured epidermal cells on a synthetic dermal substitute, can engraft deep wounds, it requires the wound bed to be well-vascularized and lacks skin appendages. In this study, we successfully generate complete skin grafts with pluripotent stem cell-derived epidermis with appendages on p63 knockout embryos’ dermis. Donor pluripotent stem cell-derived keratinocytes encroach the embryos’ dermis by eliminating p63 knockout keratinocytes based on cell-extracellular matrix adhesion mediated cell competition. Although the chimeric skin contains allogenic dermis, it is engraftable as long as autologous grafts. Furthermore, we could generate semi-humanized skin segments by human keratinocytes injection into the amnionic cavity of p63 knockout mice embryos. Niche encroachment opens the possibility of human skin graft production in livestock animals.