The mechanism by which minoxidil, whether given orally or applied topically, stimulates hair growth remains undetermined. Possible indirect drug action, such as vasodilatation and increased blood flow to the dermal papilla, or possible local irritation related to minoxidil or to one or more components of the vehicle used for topical application has been suggested. Possible sites of direct drug action include either the dermal papilla of the follicle or hair matrix cells or possibly both. Morphometric studies of control scalp biopsies taken from young male patients with androgenetic alopecia reveal that the primary morphologic event in androgenetic alopecia is miniaturization of terminal hair follicles. Shortening and diminution of follicle size is undoubtedly accompanied by shortening of the hair growth cycle (decreased anagen time). Morphometric evaluation of scalp biopsies of patients receiving topical minoxidil in a vehicle composed of propylene glycol, water and ethanol has revealed growth of larger normally formed follicles when compared with pretreatment biopsies from the same individual. There has been no suggestion in any morphologic studies of minoxidil-treated patients for development of new follicles (follicular neogenesis). Because the dermal papilla of the hair follicle apparently controls both growth and differentiation of hair matrix cells and because there are no observable dysplastic or atypical changes in follicular germinal epithelium during or after application of topical minoxidil, it is concluded that the most probable site for the action of minoxidil is on the specialized mesenchymal cells of the follicular dermal papilla.