Hair follicles (HFs) undergo cyclical periods of growth, which are fueled by stem cells (SCs) at the base of the resting follicle. HF-SC formation occurs during HF development and requires transcription factor SOX9. Whether and how SOX9 functions in HF-SC maintenance remain unknown. By conditionally targeting Sox9 in adult HF-SCs, we show that SOX9 is essential for maintaining them. SOX9-deficient HF-SCs still transition from quiescence to proliferation and launch the subsequent hair cycle. However, once activated, bulge HF-SCs begin to differentiate into epidermal cells, which naturally lack SOX9. In addition, as HF-SC numbers dwindle, outer root sheath production is not sustained, and HF downgrowth arrests prematurely. Probing the mechanism, we used RNA sequencing (RNA-seq) to identify SOX9-dependent transcriptional changes and chromatin immunoprecipitation (ChIP) and deep sequencing (ChIP-seq) to identify SOX9-bound genes in HF-SCs. Intriguingly, a large cohort of SOX9-sensitive targets encode extracellular factors, most notably enhancers of Activin/pSMAD2 signaling. Moreover, compromising Activin signaling recapitulates SOX9-dependent defects, and Activin partially rescues them. Overall, our findings reveal roles for SOX9 in regulating adult HF-SC maintenance and suppressing epidermal differentiation in the niche. In addition, our studies expose a role for SCs in coordinating their own behavior in part through non-cell-autonomous signaling within the niche.