Background: Palmoplantar pustulosis (PPP) is a chronic, debilitating inflammatory skin disorder characterized by erythematous pustules and desquamation on the palms and soles with severe impact on quality of life. While IL-17 pathways have been implicated in PPP pathogenesis, clinical trials with IL-17 inhibitors have yielded conflicting results, underscoring the need for a deeper understanding of its underlying mechanisms. Methods: We employed single-cell RNA sequencing (scRNA-seq) and spatial transcriptomics to analyze skin biopsies from PPP patients (n=3) and healthy controls (n=5). We identified distinct cellular populations, their gene expression profiles, and interactions contributing to PPP pathology. Results: We analyzed 32,364 cells using scRNAseq, identifying nine major cell types and revealing significant differences in cellular compositions between lesional PPP, nonlesional skin, and healthy controls. Within the lymphocyte population, regulatory T cells (Treg) and T helper 17 cells (Th17) were exclusively presented in PPP samples. Further characterization uncovered two distinct Th17 subpopulations with differential cytokine expression and regulation. A subpopulation termed “regulatory Th17” expressed immune regulatory molecules FOXP3 and CTLA4 and demonstrated elevated levels of IL17F and IL26 in lesional cells. These cells directly interact with IL36G+ supraspinous keratinocytes, amplifying the inflammatory response. Immunohistochemistry analysis further confirmed elevated levels of IL-26 and IL-17 in lesional skin, implicating these cytokines in the inflammatory cascade associated with PPP. Conclusions: Our findings underscore the complexity of PPP pathogenesis, involving unique immunological environments and T cell plasticity. The identification of regulatory Th17 cells as major IL-26 producers and their interaction with inflammatory keratinocytes suggests potential therapeutic targets.