We have examined the growth capacity of keratinocytes isolated from human scalp hair follicles. Like the keratinocytes of glabrous epidermis, most of the colony-forming cells are classified as holoclones or meroclones when analyzed in a clonal assay. Some of them have extensive growth potential, as they are able to undergo at least 130 doublings. Therefore, the hair follicle, like the epidermis, contains keratinocytes with the expected property of stem cells: an extensive proliferative capacity permitting the generation of a large amount of epithelium. We have also examined the distribution of clonogenic keratinocytes within the hair follicle. Several hundred colony-forming cells are concentrated at a region below the midpoint of the follicle and outside the hair bulb. This region lies deeper than the site of insertion of the arrector pili muscle, which corresponds with the position of the bulge when the latter can be identified. In contrast, few colony-forming cells are present in the hair bulb, where most of the mitotic activity is observed during the active growth phase of the follicle. Paraclones, which are present both in the midregion and in the bulb of hair follicles, are unlikely to be the transient amplifying cells expected from kinetic studies.