Defolliculated (Gsdma3(Dfl)/+) mice have a hair loss phenotype that involves an aberrant hair cycle, altered sebaceous gland differentiation with reduced sebum production, chronic inflammation, and ultimately the loss of the hair follicle. Hair loss in these mice is similar to that seen in primary cicatricial, or scarring alopecias in which immune targeting of hair follicle stem cells has been proposed as a key factor resulting in permanent hair follicle destruction. In this study we examine the mechanism of hair loss in GsdmA3(Dfl)/+ mice. Aberrant expression patterns of stem cell markers during the hair cycle, in addition to aberrant behavior of the melanocytes leading to ectopic pigmentation of the hair follicle and epidermis, indicated the stem cell niche was not maintained. An autoimmune mechanism was excluded by crossing the mice with rag1-/- mice. However, large numbers of macrophages and increased expression of ICAM-1 were still present and may be involved either directly or indirectly in the hair loss. Reverse transcriptase-PCR (RT-PCR) and immunohistochemistry of sebaceous gland differentiation markers revealed reduced peroxisome proliferator-activated receptor-γ (PPARγ), a potential cause of reduced sebum production, as well as the potential involvement of the innate immune system in the hair loss. As reduced PPARγ expression has recently been implicated as a cause for lichen planopilaris, these mice may be useful for testing therapies.