Hair follicles are essential appendages of the mammalian skin, as hair performs vital functions of protection, thermoregulation and sensation. Hair follicles harbour exceptional regenerative abilities as they contain multiple somatic stem cell populations such as hair follicle stem cells (HFSCs) and melanocyte stem cells. Surrounding the stem cells and their progeny, diverse groups of cells and extracellular matrix proteins are organized to form a microenvironment (called ‘niche’) that serves to promote and maintain the optimal functioning of these stem cell populations. Recent studies have shed light on the intricate nature of the HFSC niche and its crucial role in regulating hair follicle regeneration. In this Review, we describe how the niche serves as a signalling hub, communicating, deciphering and integrating both local signals within the skin and systemic inputs from the body and environment to modulate HFSC activity. We delve into the recent advancements in identifying the cellular and molecular nature of the niche, providing a holistic perspective on its essential functions in hair follicle morphogenesis, regeneration and ageing.