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A number of fascinating questions remain unaddressed in the realm of skin biology. We still know very little about the mechanisms that set up the patterning of hair follicles over the surface ectoderm, or about the precise signalling pathways involved in mesenchymal-epithelial interactions during hair development and differentiation. Studies over the past 10 years have implicated both the notch and sonic hedgehog pathways in these processes (Chen et al., 1997; Chiang et al., 1999; Crowe et al., 1998; Kopan and Weintraub, 1993; Nohno et al., 1995; Oro and Scott, 1998; Powell et al., 1998; St. Jacques et al., 1998). Furthermore, we know that members of the fibroblast growth factor and bone morphogenic protein families are also involved in mesenchymal-epithelial cues required for follicle morphogenesis, hair cycling, and/or follicle differentiation (Hebert et al., 1994; Jung et al., 1998; Kratochwil et al., 1996; Noramly and Morgan, 1998; Rosenquist and Martin, 1996; Song et al., 1996). However, it is not clear precisely how these pathways and factors are involved and how they might also interact with the wnt pathway in regulating hair follicle patterning and morphogenesis. These areas are currently centers of activity in the field, and answers will undoubtedly emerge with the flurry of new experiments presently being conducted. Another important issue is the residence of stem cells within the skin. While it is clear that the epidermis contains a population of cells with extraordinary proliferative capacity (Jones and Watt, 1993; Jones et al., 1995), their precise location in most body regions of the skin remains unclear. Similarly, while the bulge hypothesis has received considerable attention and support as the residence of the hair follicle stem cells (Cotsarelis et al., 1989; Lavker et al., 1993), the outer root sheath and the matrix of the follicle have also been postulated as potential homes for these critical cells (Oliver and Jahoda, 1988; Rochat et al., 1994). An equally challenging issue for the future is the extent to which skin stem cells might retain pluripotency, able to choose between an epidermal or hair follicle cell fate. Our recent studies implicating a Wnt pathway provide a starting point for exploration. I have discussed a number of recent insights that have surfaced concerning transcriptional regulation in the epidermis. Additionally, besides Lef1/beta-catenin, there are a number of transcription factors that have been identified that are likely to regulate key aspects of hair follicle differentiation and gene expression. The most interesting of these include a member, Whn, of the winged-helix transcription factors, recently been shown to be the defect underlying the nude mouse phenotype (Nehls et al., 1994; Segre et al., 1995) and the zinc finger transcription factor responsible for the hairless phenotype in mice and in humans (Ahmad et al., 1998; Cachon-Gonzalez et al., 1994). A major area for future study will be to elucidate the upstream and/or downstream targets of Lef1/beta-catenin, hairless, and whn. Let me close by returning to the issues of structure and function in the skin and to the underlying genetic basis of skin disorders. It is surprising that despite nearly 20 years of molecular genetics and its application to skin biology, we still know very little about the molecules and pathways involved in the acquisition of the epidermal barrier, the very purpose of the epidermis. Biochemical studies have given us clues as to the most important lipids involved (for review, see Proksch et al., 1993), and recent studies suggest that barrier function may in part be regulated through action of the steroid hormone superfamily of receptors (Attar et al., 1997; Hardman et al., 1998). A major research effort is now needed to begin to decipher the transcriptional regulation and the complex pathways involved in lipid synthesis and packaging. (ABSTRACT TRUNCATED)