Graft-versus-host disease (GVHD) is the major complication after allogeneic stem cell transplantation (SCT). Emerging evidence indicates that GVHD leads to injury of intestinal stem cells. However, it remains to be investigated whether skin stem cells could be targeted in skin GVHD. Lgr5⁺ hair follicle stem cells (HFSCs) contribute to folliculogenesis and have a multipotent capacity to regenerate all epithelial cells in repair. We studied the fate of Lgr5⁺ HFSCs after SCT and explored the novel treatment to protect Lgr5⁺ HFSCs against GVHD using murine models of SCT. We found that GVHD reduced Lgr5⁺ HFSCs in association with impaired hair regeneration and wound healing in the skin after SCT. Topical corticosteroids, a standard of care for a wide range of skin disorders including GVHD, damaged HFSCs and failed to improve skin homeostasis, despite of their anti-inflammatory effects. In contrast, JAK1/2 inhibitor ruxolitinib significantly ameliorated skin GVHD, protected Lgr5⁺ HFSCs, and restored hair regeneration and wound healing after SCT. We, for the first time, found that GVHD targets Lgr5⁺ HFSCs and that topical ruxolitinib represents a novel strategy to protect skin stem cells and maintain skin homeostasis in GVHD.