While cell fate determination and maintenance are important in establishing and preserving tissue identity and function during development, aberrant cell fate transition leads to cancer cell heterogeneity and resistance to treatment. Here, we report an unexpected role for the transcription factor p63 (Trp63/TP63) in the fate choice of the squamous versus neuroendocrine lineage in esophageal development and malignancy. Deletion of p63 results in extensive neuroendocrine differentiation in the developing mouse esophagus and esophageal progenitors derived from human embryonic stem cells. In human esophageal neuroendocrine carcinoma (eNEC) cells, p63 is transcriptionally silenced by EZH2-mediated H3K27 trimethylation (H3K27me3). Up-regulation of the major p63 isoform ΔNp63α, through either ectopic expression or EZH2 inhibition, promotes squamous transdifferentiation of eNEC cells. Together, these findings uncover p63 as a rheostat in coordinating the transition between squamous and neuroendocrine cell fates during esophageal development and tumor progression.