The keratinocytes encased the DP cell‐spheroids, forming an epithelial column that initiated HF‐specific differentiation, expressing hair lineage markers and occasionally forming colorless hair fibers. DP cells overexpressing LEF‐1 synergistically improved HF differentiation and hair shaft formation. Dermal vascularization was observed in the constructs used for in vivo implantation. This evidence concerns the gene LEF1 and hydrops fetalis.