We compared the growth and differentiation characteristics of hair follicle-derived dermal stem cells with bone marrow mesenchymal stem cells (MSCs). Follicular dermal cells were isolated from whisker hairs of Wistar rats and bone marrow MSCs were isolated from femora of the same animals. The adherent hair follicle dermal cells showed a fibroblastic morphology in serum-containing culture medium, were CD44+, CD73+, CD90+, and CD34-, and had a population doubling time of 27 h. MSCs isolated from the bone marrow showed a similar morphology and population doubling time and expressed the same cell-surface markers. Following exposure to appropriate induction stimuli, both cell populations had the capacity to differentiate into various mesenchymal lineages, such as osteoblasts, adipocytes, chondrocytes, and myocytes and expressed neuroprogenitor cell markers. The rate and extent of differentiation were remarkably similar for both hair follicle- and bone marrow-derived cells, whereas interfollicular dermal cells failed to differentiate. We identified telomerase activity in follicle dermal stem cells and marrow MSCs and demonstrated that they were capable of clonal expansion. In ex vivo analyses, we identified the presence of putative dermal stem cells in the dermal sheath and dermal papillae of the hair follicle. Consequently, the hair follicle may represent a suitable, accessible source for MSCs.