Cutaneous nevi are common lesions that develop by proliferation of melanocyte-derived cells. The majority develop as junction nevi from melanocytes at the epidermo-dermal junction. Cells from this proliferation pass into the underlying dermis forming compound nevi. Later junctional melanocytic activity ceases, leaving an intradermal nevus. A minority of nevi, mainly blue nevi, arise from intradermal melanocytes. Histological variants of melanocytic nevi exist and can be the source of difficult diagnostic problems. Nevi are important as clinical and histological simulators of cutaneous melanoma, as precursor lesions for melanoma (although the actual chance of malignant transformation of an individual nevus is low) and as cosmetic problems (mainly large congenital nevi). Cutaneous nevi are to be separated clinically and histologically from melanomas that are comprised of nevocyte-like cells (minimal deviation melanoma).