Isolated dermal cells possess the capacity to induce hair growth. The cells cannot be expanded while they retain the capacity for hair induction, and lose their potential immediately after cultivation. Sphere-forming multipotent cells derived from the dermis (skin-derived precursors [SKPs]) possess hair-inducing activity. These observations provide two possibilities for the determination of the capacity for hair induction: capacity is dependent on either identity as a dermal cell or on the process of sphere formation. We developed a method that demonstrates cultivated mesenchymal cells derived from dermis and lung tissue possess in vivo hair-inducing capacity via sphere formation.