Skin pigmentation is due to the accumulation of two types of melanin granules in the keratinocytes. Besides being the most potent blocker of ultraviolet radiation, the role of melanin in photoprotection is complex. This is because one type of melanin called eumelanin is UV absorbent, whereas the other, pheomelanin, is photounstable and may even promote carcinogenesis. Skin hyperpigmentation may be caused by stress or exposure to sunlight, which stimulates the release of α-melanocyte stimulating hormone (α-MSH) from damaged keratinocytes. Melanocortin 1 receptor (MC1R) is a key signaling molecule on melanocytes that responds to α-MSH by inducing expression of enzymes responsible for eumelanin synthesis. Persons with red hair have mutations in the MC1R causing its inactivation; this leads to a paucity of eumelanin production and makes red-heads more susceptible to skin cancer. Apart from its effects on melanin production, the α-MSH/MC1R signaling is also a potent anti-inflammatory pathway and has been shown to promote antimelanoma immunity. This review will focus on the role of MC1R in terms of its regulation of melanogenesis and influence on the immune system with respect to skin cancer susceptibility.