Background: The specialized dermal papilla (DP) cells and the tyrosinase-active melanocytes are central players in hair growth and pigmentation, respectively. In the hair follicle (HF), oxygen levels average about 5%O2 (physoxia) and are intimately coupled with the production of reactive oxygen species (ROS), which contribute to hair growth. Considering that oxygen and ROS might have a major role in the maintenance of the HF cellular functions, we studied the effect of physoxia over human DP cells and melanocytes (hMel) and investigated if these cells interaction altered this response.Results: Physoxia decreased DP cells senescence and improved their secretome and phenotype, representing a reliable in vitro culture environment. Further, hMel proliferation, migration and tyrosinase activity were also enhanced, demonstrating physoxia capacity to sustain biologically relevant features. Physoxia affected DP cells alkaline phosphatase (ALP) activity, but their signalling did not influence hMel proliferation or tyrosinase activity when indirectly co-cultured. Additionally, ROS production in co-cultured cells was higher than in the respective monocultures, but lower in response to physoxia than in normoxia (21%O2). Considering the results, we further assessed a potential link between DP cells ALP activity and ROS levels, but DP cells treatment with H2O2 showed that these are not directly correlated. Moreover, and given their proximity within the HF, hMel were directly cultured with DP spheroids, rendering 3D-aggregates that recreated these cells native microarchitecture and phenotype. Further, both hMel tyrosinase activity and DP cells ALP activity, their main functional indicators, as well as ROS production were higher in the 3D-aggregates cultured under physoxia than in normoxia. Conclusions: Overall, we provide evidence that the response to physoxia differs according to hMel-DP cells interactions, and that the microenvironment recreated when they are in direct contact favours their follicular functions, including hair growth and pigmentation promoting capacity.