Urea is used in cosmetics as a:

• Buffering Agent
• Humectant moisturizer
• Antistatic

“Utilized for decades by dermatologists to treat dry skin; has been demonstrated to stimulate Aquaporin-3 expression in keratinocytes.” – Grether-Beck S, Felsner I, Brenden H, et al. Urea uptake enhances barrier function and antimicrobial defense in humans by regulating epidermal gene expression [published online ahead of print March 15, 2012]. J Invest Dermatol. 2012;132:1561-1572. (Decreased AQP3 expression has been implicated as a contributing factor in a range of skin diseases.)

“In small amounts urea has good water-binding and exfoliating properties for skin; in larger concentrations it can cause inflammation.”(Source: Skin Pharmacology and Applied Skin Physiology, January-February 2002, pages 44–54).

“Urea reduces the amount of water lost through skin’s epidermis.” – Skin Moisturization (a book)

One study study compared the effects of a 5% urea and ceramide NP in an emollient cream versus just the emollient cream. The subjects were all over 60 years old with dry skin. The urea + ceramide NP cream hydrated the skin to a significantly greater extent and for a longer period of time compared to the control emollient cream. Furthermore, the urea + ceramide NP cream imparted additional benefits to the structure and function of the skin barrier not exhibited by the control emollient. I would have liked to see a 5% urea cream versus a Ceramide NP cream.

If you’re in the UK and looking for urea products, check the ingredient list for “carbamide” instead. It’s the same thing.

Other sources
The Treatment of Internal Hemorrhoids with Quinine and Urea Hydrochloride
Quinine and urea hydrochlorate as a local anesthetic