Current approaches fail at obtaining adequate functional human dermal papilla cells (DPCs) to regenerate hair follicles (HFs). Here we induce human dermal fibroblasts (hDFs) into hDPC-like cells (hDF-DPCs) through alginate-poly-L-lysine-alginate (APA) microencapsulation. Our results show that the derived hDF-DPCs are comparable to primary DPCs on the molecular level, and they can induce the formation of hair follicle-like structures and hair pigmentation in nude mice. RNA-seq analyses indicate the activation of Wnt signaling pathway during the hDF-DPCs conversion. Likewise, we demonstrate that mouse DFs differentiate into mouse DPC-like cells within the hydrogel microcapsules. The induction of dermal fibroblasts into DPC-like cells through biomimetic microencapsulation, devoid of chemical or gene reprogramming, would provide an alternative, abundant, and safe source of DPCs, which would help circumvent the bottleneck in DPC-based HF regeneration. (C) 2020 Elsevier Ltd. All rights reserved.