A subset of cells, termed side-population (SP), which have the ability to efflux Hoeschst 33342, have previously been demonstrated to act as a potential method to isolate stem cells. Numerous stem/progenitor cells have been localized in different regions of the mouse hair follicle (HF). The present study identified a SP in the mouse HF expressing the ABCG2 transporter and MTS24 surface marker. These cells are restricted to the upper isthmus of the HF and have previously been described as progenitor cells. Consistent with their SP characteristic, they demonstrated elevated expression of ABCG2 transporter, which participates in the dye efflux. Analysis of tumor epidermal cell lines revealed a correlation between the number of SP keratinocytes and the grade of malignancy, suggesting that the SP may play a role in malignant progression. Consistent with this idea, the present study observed an increased number of cells expressing ABCG2 and MTS24 in chemically induced skin tumors and skin tumor cell lines. This SP does not express the CD34 surface marker detected in the multipotent stem cells of the bulge region of the HF, which have been defined as tumor initiation cells. The present study concluded that a SP with properties of progenitor cells is localized in the upper isthmus of the HF and is important in mouse skin tumor progression.