Pigmented skin lesions are among the most common skin lesions. A majority can be diagnosed with ease; however, a minority of the cases are difficult and have the potential for error with catastrophic consequences for patients and the potential for litigation. Melanoma-related claims are second only to breast biopsy-related claims in surgical pathology. This review tries to highlight the problematic areas and diagnostic pitfalls in melanocytic lesions with emphasis on melanomas that might be underdiagnosed and benign melanocytic lesions that might be overdiagnosed and on practical approaches to deal with these lesions. Scanning power examination only is insufficient to avoid the potential diagnostic pitfalls in melanocytic lesions. We recommend examination of every melanocytic lesion in at least several high-power fields for cytologic atypia and mitotic activity. When dealing with problematic cases, it is important to see the entire lesion to determine whether lateral circumscription, nevoid maturation, and deep mitotic activity are present. Immunohistochemical analysis is useful, but it cannot replace careful examination of H&E-stained sections.