During late telogen to early anagen secondary hair germ is newly formed by the downgrowth of a clubbed column which is indistinguishable from the bulge. Serial vertical sections demonstrated that the early anagen terminal hair follicle formed the new secondary hair germ associated with a lateral protuberance of basaloid cells which could be considered as the bulge of the new hair follicle. Interestingly, the arrector pili muscle bundle was divided into two branches, one inserted into the original clubbed end and the other into this protuberance of the secondary hair germ. CAM5.2-reactive Merkel cells were present not only in the clubbed ends of the old follicle but also in the protuberance of the new hair germ. The formation of the lateral protuberance of the new hair germ preceded the appearance of CAM5.2-reactive Merkel cells in this location. Ks19.1 immunoreactivity was observed from the clubbed end to the upper half of the new hair germ. These phenomena occurred in early anagen before the club hairs were shed. It is postulated that the early anagen hair follicle formed the area within the new hair germ equivalent to the bulge and Merkel cells either moved from the bulge of the old hair follicle or differentiatedde novo from immature epithelial cells. Merkel cells or their products in the bulge may serve as attractants for the readjusting arrector pili muscle to anchor to the bulge of the new hair follicle.