Hair follicle neogenesis (HFN) occurs after large skin excisions in mice, serving as a rare regenerative model in mammalian wound healing. Wound healing typically results in fibrosis in mice and humans. We previously showed that small skin excisions in mice result in scarring devoid of HFN, displaying features of nonregenerative healing, and hedgehog (Hh) activation in the dermis of such wounds can induce HFN. In this study, we sought to verify the role of dermal Wnt/β-catenin signaling in HFN because this pathway is essential for hair follicle development but is also paradoxically well-characterized in fibrosis of adult wounds. By deletion of β-catenin in large wound myofibroblasts, we show that Wnt/β-catenin signaling is required for endogenous mechanisms of HFN. By utilizing a combined mouse model that simultaneously induces deletion of β-catenin and constitutive activation of Smoothened in myofibroblasts, we also found that β-catenin is required for Hh-driven dermal papilla formation. Transcriptome analysis confirms that Wnt/β-catenin and Hh pathways are activated in dermal papilla cells. Our results indicate that Wnt-active fibrotic status may also create a permissive state for the regenerative function of Hh, suggesting that activation of both Wnt and Hh pathways in skin wound fibroblasts must be ensured in future strategies to promote HFN.