Psoriasis is a common chronic inflammatory skin disease determined by genetic and environmental factors, resulting in the activation of IL-23/IL-17-mediated immune response, epidermal hyperproliferation, and keratinocyte activation. Long non-coding RNAs (lncRNAs) are non-protein-coding transcripts > 500 nucleotides with diverse regulatory functions; their role in epidermal dysfunction in psoriasis is poorly understood. To identify epidermal transcripts with potential roles in psoriasis, including lncRNAs, we performed RNA sequencing on keratinocytes from psoriasis and healthy skin. We identified 889 differentially expressed lncRNAs, many of which with yet unknown functions. RP11-295G20.2 was identified as a lncRNA significantly induced in psoriasis keratinocytes, and this was verified by qRT-PCR and by single-molecule in situ hybridisation. Analysis of subcellular fractions of epidermis revealed a cytoplasmic localisation in line with results of single molecule in situ hybridisation. We report that RP11-295G20.2 has a skin-enriched expression, and within skin it is mainly expressed in suprabasal epidermal layers. Moreover, RP11-295G20.2 is induced by the key psoriasis cytokine IL-17A and shows a dynamic regulation during keratinocyte differentiation with upregulation during early differentiation and downregulation in the late stage. Knockdown of RP11-295G20.2 in keratinocytes promotes terminal differentiation. Based on our findings, we named RP11-295G20.2 Cytoplasmic Differentiation-Associated Epidermal RNA, CYDAER. In summary, our study provides a comprehensive characterisation of the non-coding RNA landscape of psoriasis keratinocytes and identifies CYDAER as a skin-enriched lncRNA regulating keratinocyte differentiation. Our data suggest that overexpression of CYDAER may contribute to altered differentiation in psoriatic epidermis.