Epithelial cell shape changes underlie important events in animal development. During the postembryonic life of the nematode Caenorhabditis elegans, stem epidermal seam cells lose and actively renew mutual adherens junction contacts after each asymmetric division that separates them. The seam cell contacts are important for epidermal differentiation, but what regulates the cell-shape changes that restore them is unknown. Here, we show that NHR-25, a transcription factor of the nuclear receptor family, is expressed in the seam cells and is necessary for these cells to elongate and reach their neighbors after the asymmetric divisions. A failure to do so, caused by nhr-25 RNA interference, compromises the subsequent fate of seam-cell anterior daughters. Unexpectedly, the lack of cell-cell contacts does not prevent a unique seam cell to produce a neuroblast, even though a homeotic gene (mab-5) that normally prevents the neuroblast commitment is ectopically expressed in the absence of nhr-25 function. Seam cells lacking mutual contacts display reduced expression of a Fat-like cadherin marker cdh-3::gfp. Although some seam cells retain the ability to fuse at the final larval stage, the resulting syncytium shows gaps and bifurcations, translating into anomalies in cuticular ridges (alae) produced by the syncytium. nhr-25 RNAi markedly enhances branching of the alae caused by a mutant cuticular collagen gene rol-6. Silencing of nhr-25 also disturbs epidermal ultrastructure, which is probably the cause of compromised cuticle secretion and molting. Cell shape dynamics and molting thus represent distinct roles for NHR-25 in epidermal development.