Stem cells have been found to reside in the different organs of the human body localized in specific niches. One such mini-organ is hair follicle wherein stem cells of epidermal origin have been reported. In the present review article we have reviewed in brief about the melanocyte stem cells of the hair follicle tissue, their identification, surface marker characteristics and role in the cell based therapy for vitiligo. For many years, it was thought that the stem cells that regenerate hair follicles during the hair cycle are the highly proliferative matrix cells. This model was later challenged when Montagna and Chase observed that X-ray irradiation kills the matrix cells, but hairs can still re-form from cells within the outer root sheath cells (ORS). The ability of the upper ORS to act in concert with the dermal papilla (DP) to make hair follicles was further substantiated by dissection and transplantation experiments. The ORS cells suspension of the hair follicles obtained by FUE method was used for autologous transplantation in vitiligo patients. This method resulted in significant repigmentation in the majority of the patients.