One of the most common side effects of treatment with cyclosporin A (CsA) is hypertrichosis. This study shows that calcineurin activity is associated with hair keratinocyte differentiation in vivo, affecting nuclear factor of activated T cells (NFAT1) activity in these cells. Treatment of nude or C57BL/6 depilated normal mice with CsA inhibited the expression of keratinocyte terminal differentiation markers associated with catagen, along with the inhibition of calcineurin and NFAT1 nuclear translocation. This was associated with induction of hair growth in nude mice and retardation of spontaneous catagen induction in depilated normal mice. Furthermore, calcineurin inhibition blocked the expression of p21^waf/cip1 and p27^kip1, which are usually induced with differentiation. This was also associated with an increase in interleukin-1 expression (nude mice), a decrease in transforming growth factor- (nude and normal mice), and no change in keratinocyte growth factor expression in the skin. Retardation of catagen in CsA-treated mice was accompanied by significant alterations in apoptosis-related gene product expression in hair follicle keratinocytes. The ratio of the anti-apoptotic Bcl-2 to proapoptotic Bax expression increased, and expression of p53 and interleukin-1 converting enzyme activity decreased. These data provide the first evidence that calcineurin is functionally active in follicular keratinocytes and that inhibition of the calcineurin-NFAT1 pathway in these cells in vivo by CsA enhances hair growth.