One hundred and two cases of benign nerve sheath tumors (NSTs) were studied with a combined approach using routine light microscopy (LM), immunohistochemistry (IH) for myelin basic protein (MBP) and S-100 protein as well as transmission electron microscopy (TEM) with the aim of obtaining greater insight into the true nature of these neoplasms, and also to establish the importance of IH and TEM in their diagnosis. Myelin basic protein was not identified in any of these tumors, whereas S-100 protein was positive to a variable degree in both schwannomas and neurofibromas. TEM revealed that Schwann cells predominated in tumors which were strongly positive for S-100 protein and appeared as schwannomas by LM. However, neurofibromas showing a variable patchy positivity for S-100 were composed of an admixture of Schwann cells, fibroblast-like cells and intermediate cells considered to be modified Schwann cells. Perineurial cells in typical form were not seen. It is concluded that all NSTs are basically of Schwann cell origin and that the intermediate cells and fibroblast-like cells are variants of Schwann cells. The different morphological appearances and biological behaviour of schwannomas and neurofibromas may be related to some other factors like micro-environment or genetic predisposition. Further, both IH, especially for S-100 protein, and TEM play an important role in establishing their diagnosis.