Lack of moisture – Severely dry skin on feet and toes can eventually start to peel and flake. Environmental factors like extreme temperatures and dry air can worsen the effect. Be sure to moisturize the skin on your feet daily with a lotion, oil or foot cream to combat dryness. Athlete’s foot – This fungal infection of the foot can cause dryness, scaling, and peeling of the skin on the soles of the feet, and may even be accompanied by itching and odor.