Papillomaviruses are small DNA tumor viruses with a life cycle inseparably linked to the differentiation of the pluristratified epithelium. The infection of epithelial layers of the skin may remain latent or may result in the development of benign tumors. A certain number of distinct papillomavirus types, however, cause lesions which have a high risk of progression into carcinomas, and extensive efforts have been made to understand this process. comparatively little is known about the initial events during the establishment of a persistent infection and papilloma development. Although it is generally accepted that the growth of a papilloma requires the infection of cells in the basal layer of the epithelium, it remains unknown which cells perform this task. We have analyzed by in situ hybridization biopsy samples taken at various time points after infection of domestic rabbits with cottontail rabbit papillomavirus. The positive cells detected at a low frequency in biopsy samples taken after 11 days predominantly expressed high levels of E6 and E7 mRNA and were localized in the outer epithelial root sheath and in the bulbs of hair follicles. A clonal analysis of keratinocytes isolated from different subfragments of individual rabbit hair follicles demonstrated a clear colocalization of cottontail rabbit papillomavirus mRNA-positive cells with clonogenic cells in hair follicles. These data suggest that the cells competent to establish papillomatous growth represent a subpopulation of keratinocytes in hair follicles with properties expected of epithelial stem cells.