The synthetic immunomodulator AS101[ammonium trichloro(dioxoethylene-o,o')tellurate] was previously found to protect cancer patients from chemotherapy-induced bone marrow toxicity and alopecia. Here we show that AS101 induces hair growth in nude and normal mice. AS101 possesses the dual ability to both induce anagen and retard spontaneous catagen in the C57BL/6 mouse model. Anagen induced by AS101 is mediated by keratinocyte growth factor (KGF), as it is abrogated both in nude mice co-treated with AS101 plus neutralizing anti KGF antibodies and in AS101-treated transgenic mice expressing a dominant-negative KGF receptor transgene in basal keratinocytes. AS101 up-regulates KGF expression by activating the ras signaling pathway in cultured fibroblasts. AS101-induced delayed catagen is associated with inhibition of terminal differentiation marker expression both in nude and C57BL/6 mice epidermal follicular keratinocytes and in cultures of primary mouse follicular keratinocytes induced to differentiate. This activity is associated with relatively sustained elevation of p21waf. Delayed expression of terminal differentiation markers was not induced by AS101 in follicular keratinocytes from p21waf knockout mice. Because similar results were obtained with cultures of primary human keratinocytes and fibroblasts, preliminary case report studies revealed substantial hair growth when AS101 was topically applied on three adolescents who had remained alopeciac 1-2 years after chemotherapy. The results emphasize the unique mode of action of AS101 and highlight its potential clinical use for treating certain types of alopecia.