The expression of HLA-DR within hair follicles in alopecia areata was studied using an immunoperoxidase method. Scalp biopsies were taken from 12 patients with alopecia areata and from 6 normal control subjects. Frozen sections were stained with a panel of 4 anti-HLA-DR monoclonal antibodies, Leu 2, Leu 3, Leu 4, and T6 antibodies. The expression of DR in normal hair follicles and in most anagen follicles from nonlesional alopecia skin was confined to dendritic cells which were sparse below the level of the arrector pilorum insertion. Of the 37 anagen follicles examined in lesional skin, 25 displayed staining for DR on epithelial cells in the precortical matrix and presumptive cortex. Six follicles showed DR staining in other epithelial compartments, the lower bulb matrix, inner root sheath, and outer root sheath. Infiltration of the hair bulb matrix by T cells was seen in the majority of follicles where epithelial cells were DR+. The aberrant expression of DR antigens by hair follicle epithelium provides direct evidence that immune mechanisms are operating in the pathogenesis of alopecia areata. In a previous study of alopecia areata we found evidence of cell injury confined to the precortical matrix and presumptive cortex in lesional anagen follicles. The relative restriction of epithelial DR expression to the same site suggests that this region of the follicle is of fundamental importance in the disease process.