Several different precursor populations participate in renewal and regeneration of the mammalian skin and hair follicle. Recently, we described the existence of multipotent dermal precursors that exhibit properties of stem cells, and reside in the mesenchymal compartment of the hair follicle. When isolated and grown in vitro, these cells give rise to self-renewing, multipotent, spherical colonies of cells called Skin-derived Precursors (or “SkPs”). Here we describe methods to isolate SkPs from rodent and human skin and provide assays to determine functional differentiation of their progeny.