A basaloid follicular hamartoma (BFH) may be localized or diffuse. It may also be congenital or acquired. Development of diffuse BFHs has been associated with autoimmune disease and with the development of diffuse alopecia. Two women with autoimmune diseases had diffuse alopecia develop. We present the histologic features of BFH seen in these 2 women using vertical and transverse sections, and the response of 1 patient to retinoid therapy. Histologic sections showed a hamartomatous proliferation of hair follicles involving the majority of their hairs. The hamartomatous follicles showed variable degrees of hair differentiation. One patient, treated with oral and then topical retinoids, showed a partial regrowth of scalp hair and some regression of the cutaneous nodules. Increased sonic hedgehog signaling pathways with increased Gli-1 transcription has been shown to be present in the spectrum of follicular hamartomatous changes seen in BFHs. This may explain the response of one patient to retinoid therapy, because retinoids decrease Gli-1 transcriptional activity.