Microdissection of biopsies with sequencing of exons 4-8 of the p53 gene permitted precise morphological identification of correlation between mutations and/or loss of heterozygosity, immunoreactivty of p53 and type of squamous neoplasia. Seventy-two specimens from ten lesions of sun-exposed sites including normal epidermis were analysed. Irrespective of p53 immunoreactivity and morphological grade dysplasia, in situ or invasive cancer, in each case, carried the identical mutation indicating that invasive skin cancer and its precursors derive from the same original neoplastic clone. Additionally, morphologically normal epidermis showed some sharply demarcated immunoreactive areas. These never had the same p53 mutation as that of the adjacent tumor, indicating that their mutations were separate events and ruling them out as common precursors of cancer. Non-immunoreactive normal epidermis did not show p53 mutations. Our findings indicate that a large fraction of keratinocytes in sun-exposed human skin carry mutations of p53 and suggest that at least two options exist for such cells (i) innocuous clonal expansion with preserved morphology and normal differentiation or (ii) malignant transformation with the p53 mutation as an early event. Suggestive evidence existed that the p53 mutations were qualitatively different in the two respective groups of lesions.