The dermal components of the hair follicle exhibit a number of stem cell properties, including regenerative potential, roles in wound healing and the ability to produce a functional dermis. Here we examine the stem cell phenomenon of plasticity, focusing on recent observations of in vitro plasticity of dermal papilla and sheath cells, including previously unpublished data of neuronal-like differentiation. We then briefly address the implications of the stem cell potential of hair follicle dermal cells for the field of tissue engineering.