Lipoid proteinosis affects hundreds of families throughout the world - and is particularly common in the northern Cape region of South Africa.
It causes chicken-pox like scars, followed by extensive thickening of the skin and tongue.
As it progresses, it can lead to epilepsy and calcium deposits in the brain.
Professor John McGrath, from the institute, said: "This is an important discovery that makes it possible to screen families to see if they are carriers of the disease and to research new forms of treatment for affected people.
"It is also exciting because the discovery opens new avenues of research into other very common skin conditions such as the physical changes, including fine lines and wrinkles, which occur in normal skin ageing or chronic exposure to the sun."
Coming unstuck
The scientists believe that the body chemical which is produced by the gene acts like "biological glue" holding other skin forming chemicals together.
The protein, called extracellular matrix protein (ECM) may act like a natural sunscreen to prevent sun damage.
Treatments aimed at protecting or boosting its function could help make sure the skin stays firmly "stuck together", keeping it stronger and preventing wrinkles.
Professor McGrath said: "For now, just identifying the gene abnormality in lipoid proteinosis is a great achievement."
The origins of the disease in South Africa are thought to stem from a single German with the defect who emigrated from Cologne in the 1650s.
There are dozens of affected families, most of whom are of mixed descent, living in an area called Namaqualand.
The research is published in the journal Human Molecular Genetics.