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The cellular and molecular microenvironment of epithelial stem and progenitor cells is poorly characterized despite well-documented roles in homeostatic tissue renewal, wound healing, and cancer progression. Here, we demonstrate that, in organotypic cocultures, dermal pericytes substantially enhanced the intrinsically low tissue-regenerative capacity of human epidermal cells that have committed to differentiate and that this enhancement was independent of angiogenesis. We used microarray analysis to identify genes expressed by human dermal pericytes that could potentially promote epidermal regeneration. Using this approach, we identified as a candidate the gene LAMA5, which encodes laminin alpha5, a subunit of the ECM component laminin-511/521 (LM-511/521). LAMA5 was of particular interest as we had previously shown that it promotes skin regeneration both in vitro and in vivo. Analysis using immunogold localization revealed that pericytes synthesized and secreted LAMA5 in human skin. Consistent with this observation, coculture with pericytes enhanced LM-511/521 deposition in the dermal-epidermal junction of organotypic cultures. We further showed that skin pericytes could also act as mesenchymal stem cells, exhibiting the capacity to differentiate into bone, fat, and cartilage lineages in vitro. This study suggests that pericytes represent a potent stem cell population in the skin that is capable of modifying the ECM microenvironment and promoting epidermal tissue renewal from non-stem cells, a previously unsuspected role for pericytes. [ABSTRACT FROM AUTHOR]