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Haired skin is a defining characteristic of mammals. However, some specialized skin regions, such as human palms, soles and ventral wrist, and mouse plantar foot, are entirely hairless. Using mouse plantar skin as a model system, we show that the endogenous secreted Wnt inhibitor DKK2 suppresses plantar hair follicle development and permits the formation of hairless skin. Plantar skin retains all of the mechanistic components needed for hair follicle development, as genetic deletion of Dkk2 permits formation of fully functional plantar hair follicles that give rise to external hair, contain sebaceous glands and a stem cell compartment, and undergo regenerative growth. In the absence of Dkk2, Wnt/β-catenin signaling activity is initially broadly elevated in embryonic plantar skin and gradually becomes patterned, mimicking follicular development in normally haired areas. These data provide a paradigm in which regionally restricted expression of a Wnt inhibitor underlies specification of hairless versus hairy skin.