Alopecia areata (AA) is an autoimmune disorder of the hair follicle characterized by inflammatory cell infiltrates around actively growing (anagen) hair follicles. Substance P (SP) plays a critical role in the cutaneous neuroimmune network and influences immune cell functions through the neurokinin-1 receptor (NK-1R). To better understand the role of SP as an immunomodulatory neuropeptide in AA, we studied its expression and effects on immune cells in a C3H/HeJ mouse model for AA. During early stages of AA development, the number of SP–immunoreactive nerve fibers in skin is increased, compared to non-affected mice. However, during advanced stages of AA, the number of SP-immunoreactive nerves and SP protein levels in skin are decreased, whereas the expression of the SP-degrading enzyme neutral endopeptidase (NEP) is increased, compared to control skin. In AA, NK-1R is expressed on CD8+ lymphocytes and macrophages accumulating around affected hair follicles. Additional SP supply to the skin of AA-affected mice leads to a significant increase of mast cell degranulation and to accelerated hair follicle regression (catagen), accompanied by an increase of CD8+ cells-expressing granzyme B. These data suggest that SP, NEP, and NK-1R serve as important regulators in the molecular signaling network modulating inflammatory response in autoimmune hair loss.