ABSTRACT Epimorphin is a mesenchymal morphogen that has been shown to mediate epithelial‐mesenchymal signaling interactions in various organs. We now show that epimorphin functions in hair follicle morphogenesis; using a novel ex vivo organ culture assay, we define a mechanism for epimorphin signaling that may provide insight into general developmental processes. We found that epimorphin was produced by follicular mesenchymal cells and bound selectively to follicular epithelial cells, and that treatment with recombinant epimorphin could stimulate procession of hair follicles from telogen (resting stage) to anagen (growing stage). Based on analyses of epimorphin proteolytic digests that suggested a smaller peptide might be able to substitute for the full‐length epimorphin molecule, we determined that pep7, a 10‐amino acid peptide, was capable of inducing telogen‐to‐anagen transition both in the culture assay and in the mouse. That pep7 showed maximal activity only when modified with specific sulfhydryl‐reactive reagents suggested that a particular structural conformation of the peptide was essential for activity; molecular dynamics studies were pursued to investigate the active peptide structure. These findings define a previously unknown morphogenic process in the hair follicle that may have applications to many other organs.—Takebe, K., Oka, Y., Radisky, D., Tsuda, H., Tochigui, K., Koshida, S., Kogo, K., Hirai, Y. Epimorphin acts to induce hair follicle anagen in C57BL/6 mice. FASEB J. 17, 2037–2047 (2003)