Activating dormant stem cells in the scalp could be the key to banishing baldness, scientists believe.
Researchers made the discovery after examining tissue sample from men undergoing hair transplants.
Comparing follicles from bald and hairy scalp patches, they found that both contained the same number of stem cells.
But more mature cells called progenitor cells were lacking in the bald areas.
Stem cells in the scalp normally develop into progenitor cells, which in turn give rise to new hair growth.
But those from the bald patches appeared to have become dormant.
The research suggests that male pattern baldness may arise from a problem with follicle stem cell activation rather than too few stem cells.
"The fact that there are normal numbers of stem cells in bald scalp gives us hope for reactivating those stem cells," said study leader Dr George Cotsarelis, from the University of Pennsylvania in Philadelphia, US.
The researchers, whose findings appear in the Journal of Clinical Investigation, say the next step will be to study stem and progenitor cell populations in other types of hair loss.
They will also investigate ways of helping stem cells convert to progenitor cells.
Cell-based treatments for male-pattern baldness could involve isolating and growing active stem cells before planting them back into the scalp.
In 2007, the same team found that hair follicles in adult mice regenerate by re-awakening genes usually only active in developing embryos.
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