Dermal papilla cells (DPCs) cultured in vitro induce hair follicle formation. Using a hypoxic microenvironment to culture adipose mesenchymal stem cells (ADSCs) can promote hair follicle growth. However, the exact molecular mechanisms underlying this process remain unclear. In this study, ADSCs and DPCs from Arbas Cashmere goats were used. A hypoxic microenvironment promoted the proliferation of ADSCs and increased the pluripotency of ADSCs. The growth factors vascular endothelial growth factor (VEGF), basic fibroblast growth factor (bFGF), and platelet-derived growth factor (PDGF) were upregulated in ADSCs in the hypoxia-conditioned medium (Hypo-cm). Hypo-cm also enhanced the ability of DPCs to induce hair follicle formation. Inhibitors of the ERK1/2 signaling pathway caused the expressions of growth factors that increased in hypoxic microenvironments to decrease; moreover, hypoxia-inducible factor-1α (HIF-1α) increased the expression levels of VEGF, bFGF, and PDGF and inhibited the expression of bone morphogenic protein 7 (BMP7). In conclusion, these findings improve the theoretical basis for the development of gene therapy drugs for the treatment of alopecia areata and hair thinning.