Cutaneous cysts from a patient with Gardner's syndrome were histopathologically studied in detail. The cysts were, by and large, indistinguishable from ordinary epidermal cysts. However, several distinctive features were found: 1) epidermal or trichilemmal keratinization, 2) mature sebaceous glands connected with the cyst wall, 3) hair matrix-like structures associated with dermal papilla cells, 4) pilomatricoma-like changes, 5) intraluminal masses or pericystic deposits of shadow cells variably accompanied with foreign body reaction, 6) foreign body reaction or masses of shadow cells lining completely eroded cysts, 7) the presumptive bulge area, and 8) epithelial islands adjacent to the cyst. Each cutaneous cyst showed a variable combination of the findings described above. Foci of the basal layer of some cyst walls or epithelial islands were immunohistochemically stained with CK19, where CK20-reactive Merkel cells were also present. These findings were consistent with those of the bulge area. Unexpectedly, desmin-reactive muscle bundles, presumably indicating arrector pili muscle, were observed along the cyst wall. Our observations suggest that Gardner's cysts may be derived from putative follicular stem cells which reside in the bulge area.