Putative epithelial stem cells were identified in the hair follicle bulge as quiescent "label retaining cells". The study of these cells was hindered until the identification of bulge cell molecular markers, such as CD34 expression and K15 promoter activity. This allowed for the isolation and characterization of bulge cells from mouse follicles. Bulge cells possess stem cell characteristics, including multipotency, high proliferative potential, and their cardinal feature of quiescence. Lineage analysis demonstrated that all epithelial layers within the adult follicle and hair originated from bulge cells. Bulge cells only contribute to the epidermis during wound healing, but after isolation, when combined with neonatal dermal cells, they regenerate new hair follicles, epidermis, and sebaceous glands. Bulge cells maintain their stem cell characteristics after propagation in vitro, thus ultimately they may be useful for tissue engineering applications. Understanding the signals important for directing movement and differentiation of bulge cells into different lineages will be important for developing treatments based on stem cells as well as clarifying their role in skin disease.