Epithelial stem cells (EpSCs) in the hair follicle bulge are required for hair follicle growth and cycling. The isolation and propagation of human EpSCs for tissue engineering purposes remains a challenge. Here we develop a strategy to differentiate human iPSCs (hiPSCs) into CD200(+)/ITGA6(+) EpSCs that can reconstitute the epithelial components of the hair follicle and interfollicular epidermis. The hiPSC-derived CD200(+)/ITGA6(+) cells show a similar gene expression signature as EpSCs directly isolated from human hair follicles. Human iPSC-derived CD200(+)/ITGA6(+) cells are capable of generating all hair follicle lineages including the hair shaft, and the inner and outer root sheaths in skin reconstitution assays. The regenerated hair follicles possess a KRT15(+) stem cell population and produce hair shafts expressing hair-specific keratins. These results suggest an approach for generating large numbers of human EpSCs for tissue engineering and new treatments for hair loss, wound healing and other degenerative skin disorders.