Patients with multiple dysplastic nevi have an increased risk for malignant melanoma, and dysplastic nevi themselves have at least some potential for malignant transformation. Development of malignant melanoma is uncommon within dysplastic nevi, however. Since this transformation occurs in other types of nevi, their role as a marker of increased risk for melanoma in the patients who bear them seems to be of greater significance. This article discusses the gross, clinical and microscopic features; diagnosis; and prognosis of dysplastic nevi. The key features and pitfalls of diagnosing malignant melanoma, congenital nevus, and recurrent nevus are given.