The location of follicular and epidermal stem cells in mammalian skin is a crucial issue in cutaneous biology. We demonstrate that hair follicular stem cells, located in the bulge region, can give rise to several cell types of the hair follicle as well as upper follicular cells. Moreover, we devised a double-label technique to show that upper follicular keratinocytes emigrate into the epidermis in normal newborn mouse skin, and in adult mouse skin in response to a penetrating wound. These findings indicate that the hair follicle represents a major repository of keratinocyte stem cells in mouse skin, and that follicular bulge stem cells are potentially bipotent as they can give rise to not only the hair follicle, but also the epidermis.