Comparison of 50 proliferating trichilemmal cysts with 50 "ordinary" trichilemmal cysts indicated that both types almost invariably occurred on the scalps of women, were diagnosed clinically as cysts, followed a benign course, and featured trichilemmal keratinization. A spectrum was observed from trichilemmal cyst with minimal hyperplasia, to full-blown proliferating trichilemmal cyst. Occasionally, patients had ordinary trichilemmal cysts on their scalps associated with a proliferating trichilemmal cyst. In addition to trichilemmal keratinization, which is characteristic of the follicular isthmus, proliferating trichilemmal cysts showed a wider range of differentiation, including features of the follicular infundibulum, the lower nonkeratinizing portion of the follicular outer root sheath, and sebaceous cells. Intense inflammatory infiltrate and cellular atypia, sometimes of significant proportions, were also seen in proliferating trichilemmal cysts. It is concluded that trauma and inflammation may induce a trichilemmal cyst to proliferate and show a broader spectrum of pilosebaceous differentiation and cellular atypia of pseudocarcinomatous proportions, while maintaining its benign biologic behavior.