To identify minoxidil target cells in hair follicles we followed the uptake of radiolabeled drug in mouse vibrissae follicles both in vitro and in vivo. Autoradiography showed that both 3H-minoxidil and 3H-minoxidil sulfate accumulated in the differentiating epithelial matrix cells superior to the dermal papilla, a distribution similar to that of pigment. Minoxidil localized in melanocytes, melanocyte processes, and areas of greater melanin concentrations within the epithelial cells. Although uptake of minoxidil was significantly less in unpigmented follicles, the drug stimulated proliferation and differentiation of both pigmented and unpigmented follicles. Labeled minoxidil bound to Sepia melanin and was displaced with unlabeled minoxidil and other electron donor drugs. This interaction with melanin acts as a targeting mechanism of minoxidil to pigmented hair follicles but has no apparent functional significance in hair growth. This work illustrates how measurement of drugs in hair may be biased by pigmentation.