Embryonic hair follicle induction and formation are regulated by mesenchymal–epithelial interactions between specialized dermal cells and epidermal stem cells that switch to a hair fate. Similarly, during postnatal hair growth, communication between mesenchymal dermal papilla cells and surrounding epithelial matrix cells coordinates hair shaft production. Adult hair follicle regeneration in the hair cycle again is thought to be controlled by activating signals originating from the mesenchymal compartment and acting on hair follicle stem cells. Although many signaling pathways are implicated in hair follicle formation and growth, the precise nature, timing, and intersection of these inductive and regulatory signals remains elusive. The goal of this review is to summarize our current understanding and to discuss recent new insights into mesenchymal–epithelial interactions during hair follicle morphogenesis and cycling.