Recent genetic and molecular studies of hair follicle (HF) biology have provided substantial insight; however, the molecular data, including expression patterns, cannot be properly appreciated without an understanding of the basic cellular rearrangements and interactions that underpin HF cyclic transformations. We present a novel interpretation of the major cellular processes that take place during HF cycling--the hypothesis of hair follicle predetermination. This hypothesis is an extension of previous models of HF cellular kinetics but has two critical modifications: the dual origin of the cycling portion of the HF, and the timing of the recruitment of stem cells. A compilation of evidence suggests that the ascending portion of the HF (hair shaft and inner root sheath) arises not from bulge-located HF stem cells that contribute to the formation of only the outer root sheath (ORS), but instead from the germinative cells localized in the secondary hair germ. In middle anagen, upon completion of the downward growth of the HF, cells derived from the bulge region migrate downward along the ORS to reside at the periphery of the HF bulb as a distinct, inactive cell population that has specific patterns of gene expression - 'the lateral disc'. These cells survive catagen-associated apoptosis and, under the direct influence of the follicular papilla (FP), transform into the hair germ and acquire the ability to respond to FP signaling and produce a new hair. Thus, we propose that the specific sensitivity of germ cells to FP signaling and their commitment to produce the ascending HF layers are predetermined by the previous hair cycle during the process of transformation of bulge-derived lateral disc cells into the secondary hair germ.