Recently, various immunosuppressant drugs have been shown to induce hair growth in normal hair as well as in alopecia areata and androgenic alopecia; however, the responsible mechanism has not yet been fully elucidated. In this study, we investigate the influence of mycophenolate (MPA), an immunosuppressant, on the proliferation of human dermal papilla cells (hDPCs) and on the growth of human hair follicles following catagen induction with interferon (IFN)-gamma. IFN-gamma was found to reduce beta-catenin, an activator of hair follicle growth, and activate glycogen synthase kinase (GSK)-3 beta, and enhance expression of the Wnt inhibitor DKK-1 and catagen inducer transforming growth factor (TGF)-beta 2. IFN-gamma inhibited expression of ALP and other dermal papillar cells (DPCs) markers such as Axin2, IGF-1, and FGF 7 and 10. MPA increased beta-catenin in IFN-gamma-treated hDPCs leading to its nuclear accumulation via inhibition of GSK3 beta and reduction of DKK-1. Furthermore, MPA significantly increased expression of ALP and other DPC marker genes but inhibited expression of TGF-beta 2. Therefore, we demonstrate for the first time that IFN-gamma induces catagen-like changes in hDPCs and in hair follicles via inhibition of Wnt/beta-catenin signaling, and that MPA stabilizes beta-catenin by inhibiting GSK3 beta leading to increased beta-catenin target gene and DP signature gene expression, which may, in part, counteract IFN-gamma-induced catagen in hDPCs.