The skin immune system’s propensity to produce allergic contact dermatitis (ACD) to harmless chemicals, while otherwise being an efficient defence system, represents a dermatological paradox. We postulate that a major role in signalling in ACD is played by Toll-like receptor (TLR)2 and TLR4, and arises from their activation by extracellular danger-associated molecular patterns (DAMPs). Ligand activation of TLR4/2 results in the expression of interleukins (ILs) IL-1β, IL-6, IL-12, IL-18 and IL-23, tumour necrosis factor-α and interferon-α. These cytokines promote acquisition of sensitization, and facilitate elicitation of contact allergy via multiple mechanisms, including the recruitment of CD4+ Th1 and Th17 cells. As Th1 cells secrete large amounts of DAMPs, a DAMP immune circuit (positive-feedback loop) is created. This is an important driver of skin sensitization and skin inflammation. Pathogenic extracellular bacteria, but not commensal bacteria, produce pathogen-associated molecular pattern molecules, which stimulate the expression of Th1- and Th17-promoting cytokines via TLR2 and TLR4. This also induces an immune circuit. The ability of the skin immune system to activate host defence mechanisms and to distinguish between pathogenic bacteria and commensals provides an explanation for why skin sensitization and ACD develop, as they are processes that rely on the same biological pathways. These pathways may also shed light on the pathogenesis of chronic pustular inflammatory dermatoses (e.g. acne vulgaris). The existence of safety signals from commensal bacteria, which prevent initiation of these pathways, may provide opportunities for novel therapeutic approaches to the treatment of inflammatory skin diseases.