We have known for over 30 years that minoxidil stimulates hair growth, yet our understanding of its mechanism of action on the hair follicle is very limited. In animal studies, topical minoxidil shortens telogen, causing premature entry of resting hair follicles into anagen, and it probably has a similar action in humans. Minoxidil may also cause prolongation of anagen and increases hair follicle size. Orally administered minoxidil lowers blood pressure by relaxing vascular smooth muscle through the action of its sulphated metabolite, minoxidil sulphate, as an opener of sarcolemmal KATP channels. There is some evidence that the stimulatory effect of minoxidil on hair growth is also due to the opening of potassium channels by minoxidil sulphate, but this idea has been difficult to prove and to date there has been no clear demonstration that KATP channels are expressed in the hair follicle. A number of in vitro effects of minoxidil have been described in monocultures of various skin and hair follicle cell types including stimulation of cell proliferation, inhibition of collagen synthesis, and stimulation of vascular endothelial growth factor and prostaglandin synthesis. Some or all of these effects may be relevant to hair growth, but the application of results obtained in cell culture studies to the complex biology of the hair follicle is uncertain. In this article we review the current state of knowledge on the mode of action of minoxidil on hair growth and indicate lines of future research.