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<i>Sox18</i> is a developmental gene that encodes transcription factors. It has been indicated as be a key gene affecting the growth and development of hair follicles, in which dermal papilla cells (DPCs) have been demonstrated to play an important role through their ability to induce the formation of hair follicles. Pre-laboratory studies have found that <i>Sox18</i> is differentially expressed in the dermal papilla cells of different pattern types of Hu sheep. We speculated that <i>Sox18</i> plays an important role in the dermal papilla cells of Hu sheep. In our study, we analyzed the effect of <i>Sox18</i> on the induction ability of DPCs in order to elucidate the function and molecular mechanism of <i>Sox18</i> in the DPCs of Hu sheep. We first identified the expression of <i>Sox18</i> in the DPCs of Hu sheep by immunofluorescence staining. We then used alkaline phosphatase staining, cell morphology observations and RT-PCR to detect the effect of <i>Sox18</i> on the induction of DPCs after overexpression of or interference with <i>Sox18</i>. We also used RT-PCR, WB and immunofluorescence staining to detect the effect of <i>Sox18</i> on the Wnt/β-catenin signal pathway in DPCs. We found that <i>Sox18</i> was specifically expressed in the DPCs of Hu sheep, and that <i>Sox18</i> could enhance the alkaline phosphatase activity in the DPCs of Hu sheep and accelerate cell agglutination. The results of RT-PCR revealed that <i>Sox18</i> promoted the mRNA expression of <i>Versican</i>, <i>HHIP</i> and <i>FGFRI</i>, and inhibited the mRNA expression of <i>BMP4</i> and <i>WIF1</i>. Further studies showed that <i>Sox18</i> promoted the expression of <i>β-catenin</i> and activated the Wnt/β-catenin signal pathway in DPCs. When the Wnt/β-catenin signal pathway of DPCs was activated, the induction ability of DPCs was enhanced. Overall, we believe that <i>Sox18</i> could enhance the induction ability of DPCs in Hu sheep and regulate the induction ability of DPCs through the Wnt/β-catenin signal pathway.