The Hairless (Hr), a transcription factor, is expressed in the suprabasal cell layer of the interfollicular epidermis and the lower portion of the hair follicle epithelium, where its expression is dependent on the hair cycle. Recently, we reported a new Hr mutant mouse, Hr(Hp), in which the hairless protein (HR) was overexpressed. In this study, we documented abnormal formation of inner root sheath (IRS), suppressed expression of Dlx3, and IRS keratins in the Hr(Hp)/Hr(Hp) skin. We also found that HR down-regulated Dlx3 mRNA expression through suppression of Dlx3 promoter activity. In addition, we showed that Dlx3 regulated the expression of IRS keratins. Our results demonstrate that regulation of Dlx3 by HR affects the IRS keratin expression, thus modulating the formation of IRS of hair follicle.