In adults, bone marrow-derived cells (BMDC) can contribute to the structure of various non-haematopoietic tissues, including skin. However, the physiological importance of these cells is unclear. This study establishes that bone marrow-derived epidermal cells are proliferative and, moreover, demonstrates for the first time that BMDC can localize to a known stem cell niche: the CD34-positive bulge region of mouse hair follicles. In addition, engraftment of bone marrow cells into the epidermis is significantly increased in wounded skin, bone marrow-derived keratinocytes can form colonies in the regenerating epidermis in vivo, and the colony-forming capacity of these cells can be recapitulated in vitro. In some tissues this apparent plasticity is attributed to differentiation, and in others to cell fusion. Evidence is also provided that bone marrow cells form epidermal keratinocytes without undergoing cell fusion. These data suggest a functional role for bone marrow cells in epidermal regeneration, entering known epidermal stem cell niches without heterokaryon formation. Copyright © 2004 Pathological Society of Great Britain and Ireland. Published by John Wiley & Sons, Ltd.