Dysplastic naevi are clinically atypical and histologically are characterized by architectural disorder and cytological atypia. Their diagnosis is reproducible if criteria and thresholds are agreed upon. They are significant only in relation to melanoma, as simulants of melanoma, as markers of individuals at increased risk of developing melanoma, and as potential and occasional actual precursors of melanoma. Morphologically and biologically, they are intermediate between common naevi and melanoma. Individuals with dysplastic naevi may have deficient DNA repair, and dysplastic naevi lesions are associated with overexpression of pheomelanin, which may lead to increased oxidative damage and increased potential for DNA damage and tumour progression.