We analyzed the effect of minoxidil on hair follicles isolated from transgenic mice. These transgenic animals synthesize the reporter enzyme CAT in their hair follicles only during the active phases of hair growth. The recombinant gene used to generate these mice contained the bacterial enzyme CAT under the control of the promoter from the gene of UHS protein. Studies using in situ hybridization showed that UHS proteins are expressed specifically in the matrix cells of the hair follicle during the terminal stages of hair differentiation. Hence the expression of the UHS proteins is a clear sign of active hair growth. With other in situ hybridization studies we demonstrated that CAT mRNA is expressed in differentiating matrix cells of the hair shaft in a location similar to that in which mRNA encodes UHS proteins. Thus we can use the levels of CAT activity as a measure of hair growth. We have confirmed that expression of the transgene is found in hair that is high in anagen and low in catagen follicles. The usefulness of our model was further demonstrated by showing that minoxidil, a drug that stimulates hair growth, increased the expression of CAT in cultured hair follicles. Thus we have demonstrated that expression of this reporter gene is sensitive, hair specific, and also useful for monitoring effects in cultured hair follicles. Hence these transgenic mice provide a model system for studying the biology of hair growth.