Interferons (IFNs) have demonstrated therapeutic potential in various skin cancers, specifically squamous cell carcinoma (SCC), basal cell carcinoma (BCC), and melanoma. The precise mechanism through which type I IFNs exert their antitumor effects in skin cancers is still being studied. However, intralesional type I IFN can be used as an alternative to surgery for select patient populations, and high-dose systemic IFN therapy has been shown to be promising in patients with operable high-risk or metastatic melanoma. Despite the therapeutic potential of IFNs in skin cancer treatment, the toxicity profile often prevents the completion of treatment and further expansion of its clinical application. Type I and III IFNs use the same Janus Kinases (JAKs) for signal transduction, which are pathways initiated at a cell surface receptor that mediates the activation of target genes in the nucleus, based on this shared signaling pathway. Due to selective tumor targeting and the ability to generate both innate and adaptive immune responses, we concluded that type III IFNs have minimal side effects compared with established treatments due to selective tumor targeting. While IFN-λ, a type III IFN, shows therapeutic potential as stand-alone or in combination with another IFN, further studies need to be conducted to explore the therapeutic potential of IFN-λ in skin cancer and the underlying physiological roles and mechanisms of action. In this review, we evaluate whether treatment of skin cancer with type III IFN will have minimal side effects compared with established treatments.