A hair follicle or HF is a small part of the skin that produces the hair shaft. Paul Gerson Unna was the first to observe a bulge in the human hair follicle's outer root sheath (ORS). The bulge is present between the sebaceous gland and the arrector pili muscle and is the niche for hair follicle stem cells (HFSCs). The bulge is also a niche for melanocyte stem cells, and their loss results in graying of hair. The HFSCs express Sox9 and Lhx2, which help them maintain stemness and prevent differentiation. If Sox9 is inhibited, the cells begin to differentiate.

The HF undergoes three cyclic phases: growth phase or anagen, transitional phase or catagen, and resting phase or telogen. During the anagen phase, HFSCs and hair germ cells are activated. Hair germ cells proliferate, form the ORS, and move upwards, differentiating into follicle cells, and the hair grows. In the catagen phase, hair germ cells undergo apoptosis, hair stops growing, and only bulge stem cells survive. Telogen is the resting phase where HFSCs undergo quiescence and the hair rests in the follicle.

Adult stem cells are identified using label-retaining techniques where the DNA of cells is labeled with bromodeoxyuridine (BrdU) or tritiated-thymidine (3 H-T). The cells which divide very slowly contain the labels, while fast proliferating cells do not retain the labels. The labeled, slow-cycling cells are called label-retaining cells (LRCs). Bulge stem cells are LRCs.