Understanding the epigenetic mechanisms that control the activation of adult stem cells holds the promise of tissue and organ regeneration. Hair follicle stem cells have emerged as a prime model to study stem cell activation. Wnt/β-catenin signaling controls multiple aspects of skin epithelial regeneration, with its excessive activity promoting the hyperactivation of hair follicle stem/progenitor cells and tumorigenesis. The contribution of chromatin factors in regulating Wnt/β-catenin pathway function in these processes is unknown. Here, we show that chromatin effector Pygopus homolog 2 (Pygo2) produced by the epithelial cells facilitates depilation-induced hair regeneration, as well as β-catenin-induced activation of hair follicle stem/early progenitor cells and trichofolliculoma-like skin hyperplasia. Pygo2 maximizes the expression of Wnt/β-catenin targets, but is dispensable for β-catenin-mediated expansion of LIM/homeobox protein Lhx2(+) cells, in the stem/early progenitor cell compartment of the hair follicle. Moreover, β-catenin and Pygo2 converge to induce the accumulation and acetylation of tumor suppressor protein p53 upon the cell cycle entry of hair follicle early progenitor cells and in cultured keratinocytes. These findings identify Pygo2 as an important regulator of Wnt/β-catenin function in skin epithelia and p53 activation as a prominent downstream event of β-catenin/Pygo2 action in stem cell activation.