Wnt signaling has been implicated in stem cell (SC) biology, but little is known about how stabilized beta-catenin functions within native SC niches. We address this by defining the impact of beta-catenin stabilization on maintenance, proliferation, and lineage commitment of multipotent follicle SCs when in their native niche and in culture. We employ gain of function mutations and inducible loss of function mutations to demonstrate that beta-catenin stabilization is essential for promoting the transition between SC quiescence and conversion to proliferating transit amplifying (TA) progeny. We transcriptionally profile purified SCs isolated directly from wild-type and elevated beta-catenin follicles in both resting and activated states to uncover the discrete set of genes whose expression in native SCs is dependent upon beta-catenin stabilization. Finally, we address the underlying mechanism and show that in the SC niche, Wnt signaling and beta-catenin stabilization transiently activate Lef1/Tcf complexes and promote their binding to target genes that promote TA cell conversion and proliferation to form the activated cells of the newly developing hair follicle. We also show that these changes precede subsequent Wnt signals that impact on the TA progeny to specify the differentiation lineages of the follicle.