Mesenchymal-epithelial signalling between the dermal papilla and the hair matrix regulates cell proliferation and differentiation in mature hair follicles. The molecular basis of these interactions is largely unexplored. According to its expression in the dermal papilla, IGF-I is likely involved in reciprocal signalling. To examine its biological function in pelage follicles further, we generated transgenic mice that express Igf-I in the inner root sheath and the medulla using an involucrin promoter fragment. We demonstrate that Igf-I affects follicular proliferation, tissue remodelling, and the hair growth cycle, as well as folliclular differentiation. Transgenic skin temporarily lacks visible adipose tissue in telogen. The onset of the second, aberrant growth phase is markedly retarded. Transgenic guard hairs are significantly elongated and a small fraction of hair follicles is severely disoriented. The microscopic appearance of most hair shafts is altered and, strikingly, Igf-I transgenic mice lack hairs with a zigzag shape due to the suppression of hair shaft bending. All transgenic effects are partially compensated by ectopic expression of Igfbp3. Finally, Pdgfralpha was identified as the first molecular target that is affected in Igf-I transgenic mice. In summary, our data identify IGF-I signalling as an important mitogenic and morphogenetic regulator in hair follicle biology.