Follicular cell implantation (FCI) is based on the ability of the dermal papilla (DP) cells, found at the bottom of hair follicles, to stimulate new hairs to form. DP cells can be grown and multiplied in culture, so that a very small number of cells can produce enough follicles to cover an entire bald scalp.

In order to produce new follicles, two types of cells must be present. The first are Keratinocytes, the major cell type in the hair follicle, and the second are dermal papillae cells (DP) which lie in the upper part of the dermis, just below the hair follicle. It appears that the DP cells can induce the overlying keratinocytes to form hair follicles. There are a number of proposed techniques for hair regeneration that use combinations of cells that are implanted in the skin. The two major techniques involve either transplanting dermal papillae cells by themselves into the skin, or implanting them with keratinocytes.