AP2 transcription factors regulate many aspects of embryonic development. Studies of AP2a (Tfap2a) function in mice and zebrafish have demonstrated a role in patterning mesenchymal cells of neural crest origin that form the craniofacial skeleton, while the mammalian Tfap2b is required in both the facial skeleton and kidney. Here, we show essential functions for zebrafish tfap2a and tfap2b in development of the facial ectoderm, and for signals from this epithelium that induce skeletogenesis in neural crest cells (NCCs). Zebrafish embryos deficient for both tfap2a and tfap2b show defects in epidermal cell survival and lack NCC-derived cartilages. We show that cartilage defects arise after NCC migration during skeletal differentiation, and that they can be rescued by transplantation of wild-type ectoderm. We propose a model in which AP2 proteins play two distinct roles in cranial NCCs: an early cell-autonomous function in cell specification and survival, and a later non-autonomous function regulating ectodermal signals that induce skeletogenesis.