An effector of intercellular adhesion, beta-catenin also functions in Wnt signaling, associating with Lef-1/Tcf DNA-binding proteins to form a transcription factor. We report that this pathway operates in keratinocytes and that mice expressing a stabilized beta-catenin controlled by an epidermal promoter undergo a process resembling de novo hair morphogenesis. The new follicles formed sebaceous glands and dermal papilla, normally established only in embryogenesis. As in embryologically initiated hair germs, transgenic follicles induce Lef-1, but follicles are disoriented and defective in sonic hedgehog polarization. Additionally, proliferation continues unchecked, resulting in two types of tumors also found in humans. Our findings suggest that transient beta-catenin stabilization may be a key player in the long-sought epidermal signal leading to hair development and implicate aberrant beta-catenin activation in hair tumors.

In skin, multipotent stem cells generate the keratinocytes of the epidermis, sebaceous gland, and hair follicles. In this paper, we show that Tcf3 and Lef1 control these differentiation lineages. In contrast to Lef1, which requires Wnt signaling and stabilized ␤-catenin to express the hair-specific keratin genes and control hair differentiation, Tcf3 can act independently of its ␤-catenin interacting domain to suppress features of epidermal terminal differentiation, in which Tcf3 is normally shut off, and promote features of the follicle outer root sheath (ORS) and multipotent stem cells (bulge), the compartments which naturally express Tcf3. These aspects of Tcf3's action are dependent on its DNA binding and Groucho repressor-binding domains. In the absence of its ␤-catenin interacting domain, Lef1's behavior (⌬NLef1) seems to be markedly distinct from that of ⌬NTcf3. ⌬NLef1 does not suppress epidermal differentiation and promote ORS/bulge differentiation, but rather suppresses hair differentiation and gives rise to sebocyte differentiation. Taken together, these findings provide powerful evidence that the status of Tcf3/Lef complexes has a key role in controlling cell fate lineages in multipotent skin stem cells. The canonical Wnt/Wingless signaling pathway directs cell fate in a variety of cell types and has an integral role in organogenesis. At the core of the pathway is the stability of ␤-catenin, a protein that serves a dual role in intercellular junction formation and in transcriptional regulation. Wnt signaling inhibits the amino-terminal phosphorylation and subsequent degradation of ␤-catenin, allowing cytoplasmic pools of ␤-catenin to enter the nucleus and bind to members of the Lef1/Tcf family of HMG domain-containing DNA-binding proteins. ␤-catenin's activation domain and Lef1/Tcf's DNA-binding domain combine to form a bipartite transcriptional activator of target genes (for review, see Willert and Nusse 1998;Korswagen and Clevers 1999;Waltzer and Bienz 1999).Although Lef1/Tcf proteins often function as transactivators, these proteins can also interact with, and behave as, transcriptional repressors. CtBP represses a Wnt/Wingless response and selectively interacts with the carboxy-terminal domain of Tcf proteins, missing in Lef1 (Brannon et al. 1999). In contrast, the Groucho family of repressor proteins associate with the amino-terminal domain of all known Tcf/Lef family members (Cavallo et al. 1998;Roose et al. 1998;Brantjes et al. 2001). Genetically, a Drosophila dTcf-Groucho interaction antagonizes Wnt/Wingless signaling (Cavallo et al. 1998), and expression of Groucho proteins in Xenopus embryos can block axis formation and activation of ␤-catenin target genes, such as siamois and xnr3 ). In zebrafish, embryonic Tcf3 appears to function as a transcriptional repressor, as an amino-terminally truncated Tcf3 (missing its ␤-catenin binding domain) complements the headless phenotype caused by loss-of-function of wild-type Tcf3 (Kim et al. 2000). Therefore, in the absence of a Wnt/Wingless signal, the...

The morphogenesis of organs as diverse as lungs, teeth and hair follicles is initiated by a downgrowth from a layer of epithelial stem cells 1,2 . During follicular morphogenesis, stem cells form this bud structure by changing their polarity and cell-cell contacts. Here we show that this process is achieved through simultaneous receipt of two external signals: a Wnt protein to stabilize β-catenin, and a bone morphogenetic protein (BMP) inhibitor to produce Lef1. β-Catenin then binds to, and activates, Lef1 transcription complexes that appear to act uncharacteristically by downregulating the gene encoding E-cadherin, an important component of polarity and intercellular adhesion. When either signal is missing, functional Lef1 complexes are not made, and E-cadherin downregulation and follicle morphogenesis are impaired. In Drosophila, E-cadherin can influence the plane of cell division and cytoskeletal dynamics 3 . Consistent with this notion, we show that forced elevation of E-cadherin levels block invagination and follicle production. Our findings reveal an intricate molecular programme that links two extracellular signalling pathways to the formation of a nuclear transcription factor that acts on target genes to remodel cellular junctions and permit follicle formation.During skin development, signals from adjacent epithelial and mesenchymal cells instruct select ectodermal cells to form hair follicle buds. In turn, each bud signals to a small group of underlying mesenchymal cells to condense 1,2 . Once the bud proliferates to form a larger bulb (matrix), it encases this dermal condensate (papilla), and further differentiates into the cells of the hair shaft (Fig. 1a) 1 . Recent evidence suggests that Wnt signalling is involved in this process at a time that correlates with bud-specific patterns of upregulation of P-cadherin and downregulation of E-cadherin 4-9 . Cadherins form the transmembrane core of adherens junctions (AJs) by bridging to α-catenin and the cytoskeleton through β-catenin, a protein which on its own is prone to degradation 10,11 . β-Catenin's degradation machinery is transiently suppressed by Wnt signalling. This renders β-catenin a new-found stability and function, binding to and activating members of the Lef1/Tcf family of DNA binding proteins 11-13 . Whether there is underlying functional significance to β-catenin's link between adhesion and transcription is an issue that we now address.Wnts are expressed in ectodermal buds 14,15 , and are prime candidates to stabilize β-catenin at these sites. We confirmed this by testing the ability of the canonical skin Wnt3a to generate nuclear β-catenin in mouse keratinocytes. Keratinocytes exposed to Wnt3a-conditioned media displayed an ~7 times increase in β-catenin, as judged by immunoblot and densitometry analysis (Fig. 1b). This increase was paralleled by accumulation of β-catenin in ~85 ± 5% of the nuclei of treated cells (Fig. 1c).