How does Finasteride work?

By inhibiting the 5α-reductase, finasteride reduces the formation of the potent hormone dihydrotestosterone (DHT). Finasteride reduces circulating DHT by about 65%, and its most profound effects are in the prostate and the scalp. 

In men who are genetically susceptible, DHT is weakens hair follicles on the scalp and causes them to produce thinner, weaker, and fewer hairs. By reducing the amount of DHT in the body, these hair follicles can maintain their strength longer. Finasteride has been shown to slow hair loss and even improve hair regrowth in men with male pattern baldness. It is important to begin taking finasteride at the first signs of hair loss, and it can be used consistently for years after.