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During hair follicle morphogenesis, dermal papillae (DPs) function as mesenchymal signaling centers that cross-talk with overlying epithelium to regulate morphogenesis. While the DP regulates hair follicle formation, relatively little is known about the molecular basis of DP formation. The morphogen Sonic hedgehog (Shh) is known for regulating hair follicle epithelial growth, with excessive signaling resulting in basal cell carcinomas. Here, we investigate how dermal-specific Shh signaling contributes to DP formation and hair growth. Using a Cre-lox genetic model and RNAi in hair follicle reconstitution assays, we demonstrate that dermal Smoothened (Smo) loss of function results in the loss of the DP precursor, the dermal condensate, and a stage 2 hair follicle arrest phenotype reminiscent of Shh(-/-) skin. Surprisingly, dermal Smo does not regulate cell survival or epithelial proliferation. Rather, molecular screening and immunostaining studies reveal that dermal Shh signaling controls the expression of a subset of DP-specific signature genes. Using a hairpin/cDNA lentiviral system, we show that overexpression of the Shh-dependent gene Noggin, but not Sox2 or Sox18, can partially rescue the dermal Smo knockdown hair follicle phenotype by increasing the expression of epithelial Shh. Our findings suggest that dermal Shh signaling regulates specific DP signatures to maintain DP maturation while maintaining a reciprocal Shh-Noggin signaling loop to drive hair follicle morphogenesis.

Shh maintains dermal papilla identity and hair morphogenesis via a Noggin–Shh regulatory loop