Fibroblast growth factor 5 (FGF5) is a secreted signaling protein. Mice homozygous for a predicted null allele of the Fgf5 gene, fgf5neo, produced by gene targeting in embryonic stem cells, have abnormally long hair. This phenotype appears identical to that of mice homozygous for the spontaneous mutation angora (go). The fgf5neo and go mutations fail to complement one another, and exon 1 of Fgf5 is deleted in DNA from go homozygotes, demonstrating that go is a mutant allele of Fgf5. Expression of Fgf5 is detected in hair follicles from wild-type mice and is localized to the outer root sheath during the anagen VI phase of the hair growth cycle. These findings provide evidence that FGF5 functions as an inhibitor of hair elongation, thus identifying a molecule whose normal function is apparently to regulate one step in the progression of the follicle through the hair growth cycle.