Hair follicle stem cells (HFSCs) regenerate hair in response to Wnt signalling. Here, we unfold genome-wide transcriptional and chromatin landscapes of β-catenin-TCF3/4-TLE circuitry, and genetically dissect their biological roles within the native HFSC niche. We show that during HFSC quiescence, TCF3, TCF4 and TLE (Groucho) bind coordinately and transcriptionally repress Wnt target genes. We also show that β-catenin is dispensable for HFSC viability, and if TCF3/4 levels are sufficiently reduced, it is dispensable for proliferation. However, β-catenin is essential to activate genes that launch hair follicle fate and suppress sebocyte fate determination. TCF3/4 deficiency mimics Wnt-β-catenin-dependent activation of these hair follicle fate targets; TCF3 overexpression parallels their TLE4-dependent suppression. Our studies unveil TCF3/4-TLE histone deacetylases as a repressive rheostat, whose action can be relieved by Wnt-β-catenin signalling. When TCF3/4 and TLE levels are high, HFSCs can maintain stemness, but remain quiescent. When these levels drop or when Wnt-β-catenin levels rise, this balance is shifted and hair regeneration initiates. © 2014 Macmillan Publishers Limited. All rights reserved.