The accuracy of the dinical diagnosis of cutaneous melanoma with the unaided eye is only about 60%. Dermoscopy, a non-invasive, in vivo technique for the microscopic examination of pigmented skin lesions, has the potential to improve the diagnostic accuracy. Our objectives were to review previous publications, to compare the accuracy of melanoma diagnosis with and without dermoscopy, and to assess the influence of study characteristics on the diagnostic accuracy. We searched for publications between 1987 and 2000 and identified 27 studies eligible for meta-analysis. The diagnostic accuracy for melanoma was significantly higher with dermoscopy than without this technique (log odds ratio 4.0 [95% CI 3.0 to 5.1] versus 2.7 [1.9 to 3.4]; an improvement of 49%, p = 0.001). The diagnostic accuracy of dermoscopy significantly depended on the degree of experience of the examiners. Dermoscopy by untrained or less experienced examiners was no better than clinical inspection without dermoscopy. The diagnostic performance of dermoscopy improved when the diagnosis was made by a group of examiners in consensus and diminished as the prevalence of melanoma increased. A comparison of various diagnostic algorithms for dermoscopy showed no significant differences in their diagnostic performance. A thorough appraisal of the study characteristics showed that most of the studies were potentially influenced by verification bias. In conclusion, dermoscopy improves the diagnostic accuracy for melanoma in comparison with inspection by the unaided eye, but only for experienced examiners.