Melanocyte stem cells (McSCs) are the undifferentiated melanocytic cells of the mammalian hair follicle (HF) responsible for recurrent generation of a large number of differentiated melanocytes during each HF cycle. HF McSCs reside in both the CD34+ bulge/lower permanent portion (LPP) and the CD34- secondary hair germ (SHG) regions of the HF during telogen. Using Dct-H2BGFP mice, we separate bulge/LPP and SHG McSCs using FACS with GFP and anti-CD34 to show that these two subsets of McSCs are functionally distinct. Genome-wide expression profiling results support the distinct nature of these populations, with CD34- McSCs exhibiting higher expression of melanocyte differentiation genes and with CD34+ McSCs demonstrating a profile more consistent with a neural crest stem cell. In culture and in vivo, CD34- McSCs regenerate pigmentation more efficiently whereas CD34+ McSCs selectively exhibit the ability to myelinate neurons. CD34+ McSCs, and their counterparts in human skin, may be useful for myelinating neurons in vivo, leading to new therapeutic opportunities for demyelinating diseases and traumatic nerve injury.