Hair follicle (HF) development is orchestrated by coordinated signals from adjacent epithelial and mesenchymal cells. In humans this process only occurs during embryogenesis and viable strategies to induce new HFs in adult skin are lacking. Here, we reveal that activation of Hedgehog (Hh) signaling in adjacent epithelial and stromal cells induces new HFs in adult, unwounded dorsal mouse skin. Formation of de novo HFs recapitulated embryonic HF development, and mature follicles produced hair co-occurring with epithelial tumors. In contrast, Hh-pathway activation in epithelial or stromal cells alone resulted in tumor formation or stromal cell condensation respectively, without induction of new HFs. Provocatively, adjacent epithelial-stromal Hh-pathway activation induced de novo HFs also in hairless paw skin, divorced from confounding effects of pre-existing niche signals in haired skin. Altogether, cell-type-specific modulation of a single pathway is sufficient to reactivate embryonic programs in adult tissues, thereby inducing complex epithelial structures even without wounding.