Substantial follicle remodelling during the regression phase of the hair growth cycle is coordinated by the contraction of the dermal sheath smooth muscle, but how dermal-sheath-generated forces are regulated is unclear. Here, we identify spatiotemporally controlled endothelin signalling-a potent vasoconstriction-regulating pathway-as the key activating mechanism of dermal sheath contraction. Pharmacological blocking or genetic ablation of both endothelin receptors, ET and ET, impedes dermal sheath contraction and halts follicle regression. Epithelial progenitors at the club hair-epithelial strand bottleneck produce the endothelin ligand ET-1, which is required for follicle regression. ET signalling in dermal sheath cells and downstream contraction is dynamically regulated by cytoplasmic Ca levels through cell membrane and sarcoplasmic reticulum calcium channels. Together, these findings illuminate an epithelial-mesenchymal interaction paradigm in which progenitors-destined to undergo programmed cell death-control the contraction of the surrounding sheath smooth muscle to orchestrate homeostatic tissue regression and reorganization for the next stem cell activation and regeneration cycle.