Despite their differences, epidermal appendages, including mammalian hair follicles or avian feathers, share a similar developmental programme. A reciprocal exchange of inductive cues occurs between mid-gestation ectoderm and mesenchyme, to determine where these structures will form and trigger their initial development (Fig. 2).⁸³ Recombination experiments suggested the first signal arising from the mesenchyme instructs regions of the pluripotent ectoderm to elongate into regularly spaced placode structures.⁸⁴ Epidermal signals from the placode cue underlying mesenchymal fibroblasts to organize into dermal condensates, or dermal prepapilla. A second "dermal message" from the condensate subsequently prompts epidermal cells in the placode to proliferate and grow down into the dermis, forming a hair peg, which will eventually engulf the dermal condensate to form a dermal papilla. This close epidermal-mesenchymal crosstalk is believed to stimulate further proliferation and differentiation of epidermal cells into many components of the mature hair follicle.⁸³ In the hair peg, epidermal cells that lose contact with the dermal papilla become outer root sheath (ORS) cells, a compartment that is contiguous with the basal layer of the interfollicular epidermis (IFE).⁸⁵ Matrix cells are highly proliferative epidermal cells that maintain contact with the dermal papilla and start to adopt distinct differentiation programs on withdrawal from the cell cycle. These differentiating cells move upwards in morphologically distinct concentric cylinders of cells that emerge at staggered intervals during postnatal development; the outer three cylinders of the inner root sheath (IRS) develop first, while the three central hair shaft layers arise later.⁸⁴ The final epidermal lineage to emerge is the oil-rich sebocytes, which populate the sebaceous glands, off the upper portion of hair follicles.

Many aspects of embryonic epithelial-mesenchymal crosstalk are redeployed in adult skin where hair follicles cycle through periods of active growth (anagen), periods of regression (catagen) and rest (telogen) (Fig. 2). During anagen, matrix cells enrobing the dermal papilla continue to proliferate and differentiate, elongating the emerging hair shaft. Matrix cells have a finite proliferative capacity, influenced in part by the size and stimulatory output of the dermal papilla.^84,86 When the proliferative potential of matrix cells is exhausted, a destructive phase ensues resulting in apoptotic cell death of the lower two-thirds of the hair follicle.⁸⁷ During catagen, the dermal papilla also dramatically reduces in size and transforms into a quiescent cluster of cells.⁸⁸ However, the shrunken dermal papilla is pulled through the dermis trailing the lower portion of the follicle as it regresses to a resting position close to the permanent bulge region, the niche of epidermal stem cells.^86,89 The resting telogen hair follicle remains essentially inactive, with a small ORS-like hair germ and rudimentary dermal papilla, separated by a thick basement membrane.⁹⁰ Having lost its anchorage, the old hair shaft, or hair club, may be readily shed.⁸⁷ Although the exact nature of the trigger to enter the next anagen cycle remains unknown, it is hypothesized that in response to signals from dermal papilla, epidermal stem cells in the bulge region are transiently activated to proliferate and repopulate the lower portion of the hair follicle ("bulge activation hypothesis").^86,91 Subsequently, dermal progenitors are recruited to the dermal papilla from reservoirs in the adjacent dermal sheath⁸⁸ likely in response to epidermal signals from secondary hair germ. As anagen proceeds, a similar cascade of mesenchymal-epithelial cross-talk that leads to the production of matrix cells, inner root sheath and hair shaft lineages during embryonic hair follicle morphogenesis is redeployed.⁹⁰

A putative candidate for the first epidermal signal required for induction of the dermal condensate is Shh, expressed early in the developing placodes.^92,93 Although overexpression of Shh can induce ectopic placode formation in chick skin^94,95 Shh overexpression in embryonic mouse skin results in disorganized hyperproliferative epithelial growths.⁹⁶ Furthermore, hair follicle induction is initiated in Shh^-/- mutants, but subsequently arrests, resulting in small placodes with rudimentary mesenchymal condensates.^1,3,97 These findings suggest that Shh signaling is not required for initial specification events, but plays an important role in subsequent signaling required for dermal papilla development⁹⁷ and/or hair follicle downgrowth.³ Consistent with this, expression of Hh target genes Gli1 and Ptc1 is detected in both epidermal and mesenchymal compartments of hair follicles throughout development.^3,7 Rudimentary Shh^-/- dermal papilla contain fewer PDGFR-a-positive mesenchymal cells and fail to express differentiation markers, such as alkaline phosphatase and Wnt5a, suggesting that Shh signaling is required for proliferation and differentiation of papilla fibroblasts.^3,97,98 Epithelial-epithelial Shh signaling is required to promote proliferation of epidermal cells in developing hair follicles.^3,99 Furthermore, terminal differentiation of interfollicular keratinocytes is unaffected in Shh^-/- mutants, while disorganized hair follicle structures express low levels of hair keratins, indicating that Shh signaling is likely not required for epidermal lineage determination, but may regulate expansion of hair follicle progenitors.^1,3,99 During the adult hair cycle, Shh is induced in secondary hair germs at the telogen-anagen transition where transient activation of Ptc1 is observed in the bulge region.¹⁰⁰ As anagen proceeds, asymmetric Shh expression in distal matrix cells is believed to promote proliferation of hair progenitor cells. Shh induces precocious anagen from telogen follicles² while blocking Shh signaling results in telogen arrest of postnatal hair follicles with reversible hair loss.⁴ Interestingly, a novel role for Hh signaling in the maturation of postnatal sebocytes has recently been reported and is likely mediated through Ihh.^101,102 Shh signaling plays an important role in expanding epidermal progenitors and promoting dermal papilla maturation, likely to enable other signaling pathways to specify commitment to hair follicle lineages during embryonic and adult hair follicle development.

During mouse embryonic hair follicle development, Gli2 is the major activator mediating Shh responses in the developing skin.⁹⁹ The Gli2^-/- follicle defect phenocopies the arrested follicular development of Shh^-/- mutant mice, with reduced Shh target responsive gene expression and decreased cell proliferation. Through tissue-specific transgenic rescue experiments in mutant background, we have shown that activation of Gli2 function in the epidermis by Shh signaling is essential for embryonic hair follicle development. Although the development of dermal papillae is severely affected in Gli2^-/- skin and Gli2^-/- dermal fibroblasts fail to respond to Shh in vitro, restoration of Gli2 activity in the epithelium is sufficient to fully rescue hair follicle development in Gli2^-/- skin. Despite phenotypic similarities, epidermal overexpression of Gli2 does not rescue Shh^-/- follicles, suggesting that Gli2 activator function is Shh-dependent. DNGli2, a mutant form of Gli2 lacking the N-terminal repression domain, activates Shh target gene expression constitutively both in vitro and in vivo.⁴⁹ Importantly, DNGli2, but not Gli2, can induce Gli1 and Ptc1 expression in Shh^-/- skin and induce ectopic expression of Gli1 and Ptc1 in regions normally lacking Shh response (Fig. 3). These results establish that DNGli2 functions as a constitutive activator of Hh target genes in vivo. Similarly, in Drosophila, the activator function of Ci has been shown to be Hh-dependent; an uncleavable form of Ci, which is incapable of forming the repressor form, cannot induce the expression of target genes in the absence of Hh signaling.²⁴

While these results demonstrate the Shh-dependent activator function of Gli2, it remains unclear whether Gli2 also acts as a repressor in the absence of Shh signaling in the skin. Interestingly, Gli1 can compensate for the lack of Gli2 function in Gli2^Gli1/Gli1 mice during embryonic development, but remarkably, adult Gli2^Gli1/Gli1 mice develop skin defects, including alopecia and ulcers.⁵⁷ The molecular mechanisms behind this adult skin phenotype await further investigation, it is plausible that Gli2 may possess a repressor function, which is lacking in Gli1, and this Gli2 repressor function plays a key regulatory role in adult hair cycle.

Although DNGli2 can activate target gene expression and restore cell proliferation in Shh^-/- epithelium, the rescue of hair follicle development is not complete in K5Cre; Z/AP DNGli2; Shh^-/- skin. Restored activator function of Gli2 in K5Cre; Z/AP DNGli2; Shh^-/- epithelium may compete with high levels of endogenous Gli3 repressor function for target gene control, hindering hair follicle development. Gli2 and Shh mutants, which are both deficient for Gli activator function, display a similar but distinct arrest of hair follicle development; the more severe defects in Shh mutants could be compounded by the additional excess of Gli repressor activity. Consistent with the notion that Shh signaling acts to inhibit the repressor activity of Gli3,^27,49 there is a dramatic rescue of Shh mutant defects in the developing neural tube,^69,73,103 face and forebrain,⁷¹ as well as limbs,^72,74 when Gli3 repressor function is removed in Shh; Gli3 mutants.

To address the role of Gli repressor activity in the developing skin, we examined the development of vibrissae and pelage follicles in Shh; Gli3 compound mutants. As seen in other systems, excess Gli3 repressor contributes to the Shh mutant skin phenotype, since removal of Gli3 significantly alleviates the developmental arrest of Shh mutant follicles (Fig. 4, P.M. and C.c.H., manuscript in preparation). Transcription of early cell cycle regulators, including N-myc and cyclin D2, is derepressed in Shh^-/-; Gli3^-/- mutants, contributing to the partial rescue of keratinocyte proliferation (P.M. and C.c.H., manuscript in preparation). However, transcription of late G₁ regulators is also Shh-dependent requiring additional Gli activator functions to allow for robust cell cycle progression and rescue of epithelial proliferative responses during hair follicle development. Our results suggest that Shh controls proliferation of the embryonic epidermis through a complex transcriptional cascade of multiple cell cycle regulators via both Gli-dependent gene activation and de-repression. There is growing support for a model where the balance of Gli activator and repressor functions determine Shh responses (i.e., the transcriptional read-out of Shh target genes). It has been shown that overexpression of a constitutive Gli3 repressor can override endogenous Shh signaling and associated activator function in dorsoventral patterning of the spinal cord.^73,104 Similarly, overexpression of a dominant repressor form of Gli2 (DCGli2) is sufficient to override endogenous Shh signaling and block Gli activator-directed hair follicle development.¹⁰¹

The importance of interplay between the key developmental signaling pathways, such as Wnt, Notch, BMP and Shh, during skin development and homeostasis merits further investigation. Loss of Notch1 in adult epidermis leads to upregulated Gli2 expression and stabilization of nuclear b-catenin.¹⁰⁵ A yet unidentified Wnt signal is required to induce the placode expression of Shh,^106,107 which in turn induces Wnt5a expression in dermal papilla⁹⁸ during development and sustain high level Wnt5a expression in the stroma of BCCs.¹⁰⁸ Wnt signals can antagonize Hh responses through induction of growth arrest specific gene 1 (gas1) expression, a glycosylphosphaditylinositol-linked membrane glycoprotein which binds Shh.¹⁰⁹Gas1 expression is induced surrounding developing epidermal appendages, such as teeth and vibrissae, in a domain distinct from the Shh source and partially overlapping with Ptc1.^109-111 Although the functional dependence on Wnt signaling in the developing mandible has yet to be demonstrated, Gas1 expression may be key to sharpening Hh gradients allowing Hh responses to be periodically restricted developing teeth.¹¹⁰ These signaling pathways individually play important roles in skin development and disease, but just how entwined the complex web of synergistic and antagonistic interactions between Shh and other key signaling cascades really has only begun to be understood.

The initial inductive steps in the morphogenesis of many epidermal appendages involves similar reciprocal epithelial-mesenchymal signals.¹¹² Vibrissae are large tactile follicles, which develop earlier than pelage (dorsal) follicles, in regularly patterned tracts in the mystacial pad. While the extent of vibrissae development in Shh-/- mutants is difficult to assess due to craniofacial defects,^1,3,99 cyclopamine treatment of wild type vibrissae cultures arrests their development¹ and ectopic expression of Shh can induce supranumary vibrissae follicles,¹¹³ suggesting a role for Shh signaling in vibrissae follicle development. A proper balance of Gli activity is required to establish or maintain vibrissae tracts. Gli2^-/- and Gli3^-/- mutant vibrissae develop correctly (in contrast to Gli2 mutant pellage follicle developmental arrest), albeit in reduced or expanded numbers, respectively.⁹⁹ Furthermore, a dosage dependent rescue of the vibrissae patterning defects in Shh^-/- mutants is revealed by reducing Gli3 repressor function in Shh^-/-; Gli3^+/- and Shh^-/-; Gli3^-/- mutants, although the development and downgrowth of these structures is only partially restored (Fig. 4, P.M. and C.c.H., manuscript in preparation). Similar to the arrest of hair follicle development observed in Shh^-/- mutants, both salivary gland and tooth development are also arrested at early rudiment stages.^114,115 Abnormalities in tooth development primarily arise from compromised planar (epithelial-epithelial) Shh responses, resulting in decreased epidermal proliferation and survival while differentiation proceeds unaffected.^114,116-119 Interestingly, while rudimentary teeth are observed in tissue-specific deletion mutants of Shh and Smo, a more severe phenotype is observed in Gli2^-/-; Gli3^-/- which lack all signs of molar induction,^114,117,119 suggesting that both Gli activator and repressor functions may be involved in initial establishment and/or maintenance of these structures. In contrast, the development of some other epidermal appendages is less dependent on Shh signaling, as is the case with mammary glands and nails, likely due to redundant expression of Shh and Ihh such that target gene expression in these Shh^-/- organs is unchanged.^120-123 However, a regulatory role for Hh signaling in postnatal mammary gland during pregnancy and lactation may still exist, as ductal dysplasias and hyperplasias spontaneously arise in Gli2^-/- and Ptc1^+/- mammary glands in response to different hormonal conditions.^124,125