Type III IFNs, or IFN-λ, are the newest members of the IFN family and were long believed to play roles that were redundant with those of type I IFNs. However, IFN-λ displays unique traits that delineate them as primary protectors of barrier integrity at mucosal sites. This unique role stems both from the restricted expression of IFN-λ receptor, confined to epithelial cells and to a limited pool of immune cells, and from unique immunomodulatory properties of IFN-λ. Here, we discuss recent findings that establish the unique capacity of IFN-λ to act at the barriers of the host to balance tissue tolerance and immune resistance against viral and bacterial challenges.