Notch1-deficient epidermal keratinocytes become progressively hyperplastic and eventually produce tumors. By contrast, Notch1-deficient hair matrix keratinocytes have lower mitotic rates, resulting in smaller follicles with fewer cells. In addition, the ratio of melanocytes to keratinocytes is greatly reduced in hair follicles. Investigation into the underlying mechanism for these phenotypes revealed significant changes in the Kit, Tgfβ and insulin-like growth factor (IGF) signaling pathways, which have not been previously shown to be downstream of Notch signaling. The level of Kitl (Scf) mRNA produced by Notch1-deficient follicular keratinocytes was reduced when compared with wild type, resulting in a decline in melanocyte population. Tgfβ ligands were elevated in Notch1-deficient keratinocytes, which correlated with elevated expression of several targets,including the diffusible IGF antagonist Igfbp3 in the dermal papilla. Diffusible stromal targets remained elevated in the absence of epithelial Tgfβ receptors, consistent with paracrine Tgfβ signaling. Overexpression of Igf1 in the keratinocyte reversed the phenotype, as expected if Notch1 loss altered the IGF/insulin-like growth factor binding protein(IGFBP) balance. Conversely, epidermal keratinocytes contained less stromal Igfbp4 and might thus be primed to experience an increase in IGF signaling as animals age. These results suggest that Notch1 participates in a bi-compartmental signaling network that controls homeostasis, follicular proliferation rates and melanocyte population within the skin.