Scientists have uncovered the subtle chemical signals that stimulate the production of hairs.
Hair follicles are formed from stem cells
The discovery may help explain how diverse structures, such as teeth and lungs, are formed, and how, when things go wrong, some forms of skin cancer develop.
It may also help to explain why some people go bald.
Some immature stem cells are genetically programmed to develop into either hair or skin tissue.
A team from the Howard Hughes Medical Institute at Rockefeller University, New York, has worked out the chemical pathway that determines which route each cell will take.
They discovered that the early stages of the process are controlled by the delicate interplay of two natural proteins.
The proteins, called Wnt and noggin, trigger a complex reaction that changes a stem cell's shape so that it can separate from adjoining cells and move downward - a developmental step that is essential for the formation of a hair follicle.
Wnt has already been linked to the spread of some cancers, such as colon and breast cancer.
The researchers hope their work may shed new light on how a cancer cell spreads from its host tumour.
Stem cells destined to become hair contain two proteins - beta-catenin and Lef-1 - that are not found in stem cells that develop into skin tissue.
These two proteins appear to work together to produce changes in the stem cells that cause it to "morph" into hair.
The Rockefeller scientists previously provided evidence for this theory showing that mice which over-produced beta-catenin had extremely luxuriant fur.
Their latest research has revealed that Wnt and noggin play a crucial role in the accumulation of beta-catenin and Lef-1 within stem cells.
The build up of these two proteins then reduces the production of another protein that keeps stem cells bound together.
If the stem cells remain firmly stuck to each other, they go on to form skin tissue.
But in the absence of this molecular glue, they are able to separate out and begin the process of turning into hair cells.
The researchers believe their description of the chemistry behind structural changes in a stem cell may ultimately shed light on several developmental and disease processes.
For instance, they suspect that a lack of molecular glue - and thus an inability to interact properly with other cells - may in part explain why some cells become cancerous.
For example, squamous cell skin cancers are large masses of cells that fold downwards.
Researcher Dr Colin Jamora told BBC News Online: "Manipulation of these natural factors may in the future be valuable in either stimulating the onset of hair growth or in preventing the formation of unwanted hair."
Thomas Lober, a science information officer at Cancer Research UK, emphasized the potentially wider significance of the study.
He said: "This research underlines the importance of studying basic biological processes like the formation of our hair follicles, and how these can inform our understanding of complex diseases like cancer.
"Cancer cells can exploit faulty cell-to-cell contact to move away from the original tumour and invade other tissues.
"A better grasp of how these cell contacts work may identify new targets for research into preventing cancer spread."