MicroRNAs (miRNAs) regulate the expression of many mammalian genes and play key roles in embryonic hair follicle development; however, little is known of their functions in postnatal hair growth. We compared the effects of deleting the essential miRNA biogenesis enzymes Drosha and Dicer in mouse skin epithelial cells at successive postnatal time points. Deletion of either Drosha or Dicer during an established growth phase (anagen) caused failure of hair follicles to enter a normal catagen regression phase, eventual follicular degradation and stem cell loss. Deletion of Drosha or Dicer in resting phase follicles did not affect follicular structure or epithelial stem cell maintenance, and stimulation of anagen by hair plucking caused follicular proliferation and formation of a primitive transient amplifying matrix population. However, mutant matrix cells exhibited apoptosis and DNA damage and hair follicles rapidly degraded. Hair follicle defects at early time points post-deletion occurred in the absence of inflammation, but a dermal inflammatory response and hyperproliferation of interfollicular epidermis accompanied subsequent hair follicle degradation. These data reveal multiple functions for Drosha and Dicer in suppressing DNA damage in rapidly proliferating follicular matrix cells, facilitating catagen and maintaining follicular structures and their associated stem cells. Although Drosha and Dicer each possess independent non-miRNA-related functions, the similarity in phenotypes of the inducible epidermal Drosha and Dicer mutants indicates that these defects result primarily from failure of miRNA processing. Consistent with this, Dicer deletion resulted in the upregulation of multiple direct targets of the highly expressed epithelial miRNA miR-205.