Abstract There is increasing interest into the extent to which epithelial differentiation can be altered by mesenchymal influence, and the molecular basis for these changes. In this study, we investigated whether amnion epithelium could be transformed into skin and hair follicles by associating E12.5 to E14.5 mouse amnion from the ROSA 26 strain, with mouse embryonic hair-forming dermis from a wild-type strain. These associations were able to produce fully formed hair follicles with associated sebaceous glands, and skin epidermis. Using β-galactosidase staining we were able to demonstrate that the follicular epithelium and skin epidermis, but not the associated dermal cells, originated from the amnion. As Noggin and Sonic hedgehog (Shh) were recently shown to be required for early chick ventral skin formation, and able to trigger skin and feather formation from chick amnion, we associated cells engineered to produce those two factors with mouse amnion. In a few cases, we obtained hair buds connected to a pluristratified epithelium; however, the transformation of the amnion was impeded by uncontrolled fibroblastic proliferation. In contrast to an earlier report, none of our control amnion specimens autonomously transformed into skin and hair follicles, indicating that specific influences are necessary to elicit follicle formation from the mouse amnion. The ability to turn amnion into skin and its appendages has practical potential for the tissue engineering of replacement skin, and related biotechnological approaches.