Marie Unna hereditary hypotrichosis (MUHH) is an autosomal dominant form of genetic hair loss. In a large Chinese family carrying MUHH, we identified a pathogenic initiation codon mutation in U2HR, an inhibitory upstream ORF in the 5′ UTR of the gene encoding the human hairless homolog (HR). U2HR is predicted to encode a 34–amino acid peptide that is highly conserved among mammals. In 18 more families from different ancestral groups, we identified a range of defects in U2HR, including loss of initiation, delayed termination codon and nonsense and missense mutations. Functional analysis showed that these classes of mutations all resulted in increased translation of the main HR physiological ORF. Our results establish the link between MUHH and U2HR, show that fine-tuning of HR protein levels is important in control of hair growth, and identify a potential mechanism for preventing hair loss or promoting hair removal.