Fibroblast growth factor (FGF) 5 inhibits hair growth and induces catagen in mouse hair follicles, in vivo. Given that FGF-5 receptor (FGFR1) is expressed in dermal papilla cells (DPCs), which are known to stimulate outer root sheath cell (ORSC) proliferation, we hypothesized that FGF-5 attenuates DPC-mediated ORSC proliferation. In the present study, DPCs and ORSCs were isolated from rat vibrissae, after which the effects of FGF-5 on proliferation of ORSCs cultured in DPC-conditioned medium were assessed. We first confirmed that FGFR1 was expressed in cultured DPCs and detected FGFR2-4 as well. ORSC proliferation was increased approximately twofold when the cells were cultured in DPC-conditioned medium, and the effect was unaltered by FGF-5. In addition, FGF-5 did not directly inhibit ORSC proliferation; indeed, it actually promoted proliferation of both DPCs and ORSCs. When DPCs were first activated by exposure to FGF-1 and FGF-2, which are expressed in hair follicles during anagen, ORSC proliferation observed in the resultant conditioned medium was substantially greater than in medium conditioned by unstimulated DPCs. The FGF-1-induced enhancement was reversed by FGF-5, diminishing ORSC proliferation to control levels. By contrast, the enhancement of DPC-mediated ORSC proliferation by FGF-2 was not suppressed by FGF-5. Proliferation of ORSCs did not depend on DPC proliferation, nor did FGF-1 directly promote ORSC proliferation. Dermal papillae thus appear to require activation before they will efficiently stimulate hair growth, and FGF-5 appears to inhibit hair growth and induce catagen by blocking that activation.