The Lhx2 transcription factor plays essential roles in morphogenesis and patterning of ectodermal derivatives as well as in controlling stem cell activity. Here, we show that during murine skin morphogenesis, Lhx2 is expressed in the hair follicle (HF) buds, whereas in postnatal telogen HFs Lhx2(+) cells reside in the stem cell-enriched epithelial compartments (bulge, secondary hair germ) and co-express selected stem cell markers (Sox9, Tcf4 and Lgr5). Remarkably, Lhx2(+) cells represent the vast majority of cells in the bulge and secondary hair germ that proliferate in response to skin injury. This is functionally important, as wound re-epithelization is significantly retarded in heterozygous Lhx2 knockout (+/-) mice, whereas anagen onset in the HFs located closely to the wound is accelerated compared with wild-type mice. Cell proliferation in the bulge and the number of Sox9(+) and Tcf4(+) cells in the HFs closely adjacent to the wound in Lhx2(+/-) mice are decreased in comparison with wild-type controls, whereas expression of Lgr5 and cell proliferation in the secondary hair germ are increased. Furthermore, acceleration of wound-induced anagen development in Lhx2(+/-) mice is inhibited by administration of Lgr5 siRNA. Finally, Chip-on-chip/ChIP-qPCR and reporter assay analyses identified Sox9, Tcf4 and Lgr5 as direct Lhx2 targets in keratinocytes. These data strongly suggest that Lhx2 positively regulates Sox9 and Tcf4 in the bulge cells, and promotes wound re-epithelization, whereas it simultaneously negatively regulates Lgr5 in the secondary hair germ and inhibits HF cycling. Thus, Lhx2 operates as an important regulator of epithelial stem cell activity in the skin response to injury.