WNT signalling orchestrates a number of developmental programs. In response to this stimulus, cytoplasmic beta-catenin (encoded by CTNNB1) is stabilized, enabling downstream transcriptional activation by members of the LEF/TCF family. One of the target genes for beta-catenin/TCF encodes c-MYC, explaining why constitutive activation of the WNT pathway can lead to cancer, particularly in the colon. Most colon cancers arise from mutations in the gene encoding adenomatous polyposis coli (APC), a protein required for ubiquitin-mediated degradation of beta-catenin, but a small percentage of colon and some other cancers harbour beta-catenin-stabilizing mutations. Recently, we discovered that transgenic mice expressing an activated beta-catenin are predisposed to developing skin tumours resembling pilomatricomas. Given that the skin of these adult mice also exhibits signs of de novo hair-follicle morphogenesis, we wondered whether human pilomatricomas might originate from hair matrix cells and whether they might possess beta-catenin-stabilizing mutations. Here, we explore the cell origin and aetiology of this common human skin tumour. We found nuclear LEF-1 in the dividing tumour cells, providing biochemical evidence that pilomatricomas are derived from hair matrix cells. At least 75% of these tumours possess mutations affecting the amino-terminal segment, normally involved in phosphorylation-dependent, ubiquitin-mediated degradation of the protein. This percentage of CTNNB1 mutations is greater than in all other human tumours examined thus far, and directly implicates beta-catenin/LEF misregulation as the major cause of hair matrix cell tumorigenesis in humans.