Mutations in the EDA gene cause anhidrotic/hypohidrotic ectodermal dysplasia, a disorder characterized by defective formation of hair, sweat glands, and teeth in humans and in a mouse model, "Tabby" (Ta). The gene encodes ectodysplasin, a TNF ligand family member that activates the NF-kappaB-signaling pathway, but downstream targets and the mechanism of skin appendage formation have been only partially analyzed. Comparative transcription profiling of embryonic skin during hair follicle development in WT and Ta mice identified critical anhidrotic/hypohidrotic ectodermal dysplasia (EDA) effectors in four pathways, three already implicated in follicle formation. They included Shh and its effectors, as well as antagonists for the Wnt (Dkk4) and BMP (Sostdc1) pathways. The fourth pathway was unexpected, a variant NF-kappaB-signaling cascade based on lymphotoxin-beta (LTbeta)/RelB. Previously known to participate only in lymphoid organogenesis, LTbeta was enriched in developing hair follicles of WT but not in Ta mice. Furthermore, in mice lacking LTbeta, all three types of mouse hair were still formed, but all were structurally abnormal. Guard hairs became wavy and irregular, zigzag/auchen hairs lost their kinks, and in a phenocopy of features of Ta animals, the awl hairs doubled in number and were characteristically distorted and pinched. LTbeta-null mice that received WT bone marrow transplants maintained mutant hair phenotypes, consistent with autonomous LTbeta action in skin independent of its expression in lymphoid cells. Thus, as an EDA target, LTbeta regulates the form of hair in developing hair follicles; and when EDA is defective, failure of LTbeta activation can account for part of the Ta phenotype.