Understanding how complex tissues are formed, maintained, and regenerated through local growth, differentiation, and remodeling requires knowledge on how single-cell behaviors are coordinated on the population level. The self-renewing hair follicle, maintained by a distinct stem cell population, represents an excellent paradigm to address this question. A major obstacle in mechanistic understanding of hair follicle stem cell (HFSC) regulation has been the lack of a culture system that recapitulates HFSC behavior while allowing their precise monitoring and manipulation. Here, we establish an in vitro culture system based on a 3D extracellular matrix environment and defined soluble factors, which for the first time allows expansion and long-term maintenance of murine multipotent HFSCs in the absence of heterologous cell types. Strikingly, this scheme promotes de novo generation of HFSCs from non-HFSCs and vice versa in a dynamic self-organizing process. This bidirectional interconversion of HFSCs and their progeny drives the system into a population equilibrium state. Our study uncovers regulatory dynamics by which phenotypic plasticity of cells drives population-level homeostasis within a niche, and provides a discovery tool for studies on adult stem cell fate.