In skin, multipotent stem cells generate the keratinocytes of the epidermis
, sebaceous gland, and hair follicles. In this paper, we show that Tcf3 and
Lef1 control these differentiation lineages. In contrast to Lef1, which re
quires Wnt signaling and stabilized beta -catenin to express the hair-speci
fic keratin genes and control hair differentiation, Tcf3 can act independen
tly of its beta -catenin interacting domain to suppress features of epiderm
al terminal differentiation, in which Tcf3 is normally shut off, and promot
e features of the follicle outer root sheath (ORS) and multipotent stem cel
ls (bulge), the compartments which naturally express Tcf3. These aspects of
Tcf3's action are dependent on its DNA binding and Groucho repressor-bindi
ng domains. In the absence of its beta -catenin interacting domain, Lef1's
behavior (Delta NLef1) seems to be markedly distinct from that of Delta NTc
f3. Delta NLef1 does not suppress epidermal differentiation and promote ORS
/bulge differentiation, but rather suppresses hair differentiation and give
s rise to sebocyte differentiation. Taken together, these findings provide
powerful evidence that the status of Tcf3/Lef complexes has a key role in c
ontrolling cell fate lineages in multipotent skin stem cells.