In adult skin, epithelial hair follicle stem cells (SCs) reside in a quiescent niche and are essential for cyclic bouts of hair growth. Niche architecture becomes pronounced postnatally at the start of the first hair cycle. Whether SCs exist or function earlier is unknown. Here we show that slow-cycling cells appear early in skin development, express SC markers, and later give rise to the adult SC population. To test whether these early slow-cycling cells function as SCs, we use Sox9-Cre for genetic marking and K14-Cre to embryonically ablate Sox9, an essential adult SC gene. We find that the progeny of Sox9-expressing cells contribute to all skin epithelial lineages and Sox9 is required for SC specification. In the absence of early SCs, hair follicle and sebaceous gland morphogenesis is blocked, and epidermal wound repair is compromised. These findings establish the existence of early hair follicle SCs and reveal their physiological importance in tissue morphogenesis.