De novo hair follicle formation in embryonic skin and new hair growth in adult skin are initiated when specialized mesenchymal dermal papilla (DP) cells send cues to multipotent epithelial stem cells. Subsequently, DP cells are enveloped by epithelial stem cell progeny and other cell types to form a niche orchestrating hair growth. Understanding the general biological principles that govern the mesenchymal-epithelial interactions within the DP niche, however, has been hampered so far by the lack of systematic approaches to dissect the complete molecular make-up of this complex tissue. Here, we take a novel multicolor labeling approach, using cell type-specific transgenic expression of red and green fluorescent proteins in combination with immunolabeling of specific antigens, to isolate pure populations of DP and four of its surrounding cell types: dermal fibroblasts, melanocytes, and two different populations of epithelial progenitors (matrix and outer root sheath cells). By defining their transcriptional profiles, we develop molecular signatures characteristic for the DP and its niche. Validating the functional importance of these signatures is a group of genes linked to hair disorders that have been largely unexplored. Additionally, the DP signature reveals novel signaling and transcription regulators that distinguish them from other cell types. The mesenchymal-epithelial signatures include key factors previously implicated in ectodermal-neural fate determination, as well as a myriad of regulators of bone morphogenetic protein signaling. These findings establish a foundation for future functional analyses of the roles of these genes in hair development. Overall, our strategy illustrates how knowledge of the genes uniquely expressed by each cell type residing in a complex niche can reveal important new insights into the biology of the tissue and its associated disease states.