How dermal papilla (DP) niche cells regulate hair follicle progenitors to control hair growth remains unclear. Using Tbx18Cre to target embryonic DP precursors, we ablate the transcription factor Sox2 early and efficiently, resulting in diminished hair shaft outgrowth. We find that DP niche expression of Sox2 controls the migration speed of differentiating hair shaft progenitors. Transcriptional profiling of Sox2 null DPs reveals increased Bmp6 and decreased BMP inhibitor Sostdc1, a direct Sox2 transcriptional target. Subsequently, we identify upregulated BMP signaling in knockout hair shaft progenitors and demonstrate that Bmp6 inhibits cell migration, an effect that can be attenuated by Sostdc1. A shorter and Sox2-negative hair type lacks Sostdc1 in the DP and shows reduced migration and increased BMP activity of hair shaft progenitors. Collectively, our data identify Sox2 as a key regulator of hair growth that controls progenitor migration by fine-tuning BMP-mediated mesenchymal-epithelial crosstalk. ► Sox2 ablation in the dermal papilla niche diminishes hair outgrowth ► Migration of differentiating hair shaft progenitors is reduced ► Sox2-controlled Bmp pathway regulators regulate progenitor migration ► Sox2 controls mesenchymal-epithelial crosstalk during hair growth Mesenchymal-epithelial crosstalk is a prominent feature of hair follicle development and regeneration. Clavel et al. find that Sox2 regulates the ability of the dermal papilla niche to control hair shaft progenitor migration and thus hair outgrowth. Sox2 fine-tunes BMP signal output, which in turn attenuates progenitor migration rates.