The hair follicle (HF) is a highly conserved sensory organ associated with the immune response against pathogens, thermoregulation, sebum production, angiogenesis, neurogenesis and wound healing. Although recent advances in lineage-tracing techniques and the ability to profile gene expression in small populations of cells have increased the understanding of how stem cells operate during hair growth and regeneration, the construction of functional follicles with cycling activity is still a great challenge for the hair research field and for translational and clinical applications. Given that hair formation and cycling rely on tightly coordinated epithelial–mesenchymal interactions, we thus review potential cell sources with HF-inducive capacities and summarize current bioengineering strategies for HF regeneration with functional restoration.