The paired box gene 3 (Pax3) is expressed during pigment cell development. We tested whether the targeted allele Pax3GFP can be used as a reporter gene for pigment cells in the mouse. We found that enhanced green fluorescent protein (GFP) can be seen readily in every melanoblast and melanocyte in the epidermis and hair follicles of Pax3GFP/+ heterozygotes. The GFP was detected at all differentiation stages, including melanocyte stem cells. In the dermis, Schwann cells and nestin-positive cells of the piloneural collars resembling the nestin-positive hair follicle multipotent stem cells exhibited a weaker GFP signal. Pigment cells could be purified by fluorescent activated cell sorting and grown in vitro without feeder cells, giving pure cultures of melanocytes. The Schwann cells and nestin-positive cells of the piloneural collars were FACS-isolated based on their weak expression of GFP. Thus Pax3GFP can discriminate distinct populations of cells in the skin.