Leucine-rich repeats and immunoglobulin-like domains protein 1 (Lrig1) is a functional inhibitor of the epidermal growth factor receptor. Lrig1-positive stem cells are located in the isthmus region of the mouse hair follicle (HF) and are known contributors to sebaceous gland (SG) formation and homeostasis. In this study, we performed a topical tamoxifen inducible diphtheria toxin-mediated ablation of Lrig1-expressing cells in transgenic mice to investigate their function in vivo. Selective depletion of Lrig1-positive cells resulted in a complete but reversible loss of SGs, with atrophy beginning at day 14 and full recovery occurring after six months. In the absence of the Lrig1 niche, junctional-zone keratinocytes adopted an interfollicular epidermis-like phenotype (K1-positive), and repopulating cells from other epidermal compartments failed to differentiate into the sebocyte lineage. These findings demonstrate that Lrig1-positive progenitors are crucial for proper sebaceous gland morphogenesis and maintenance. Our results highlight the importance of Lrig1-positive cells in SG-related skin physiology.