Finasteride is a 5-Alpha Reductase Inhibitor, by inhibiting this process it lowers the rate of conversion of Testosterone into DHT, which is widely believed to be a primary contributor to Androgenic Alopecia. Finasteride is not a complete anti-androgen, it does not reduce Testosterone and will infact increase it, it merely reduces DHT.

Though the exact mechanism is unknown Finasteride is also associated with significant rates of depression and should be taken with great care.