Atypical adenomatous hyperplasia (AAH) is a localized proliferation of small glands within the prostate that may be mistaken for carcinoma. To determine the diagnostic criteria for separating AAH from carcinoma, seven observers independently evaluated 54 selected lesions from 44 transurethral resection specimens. Three patterns of glandular proliferation were observed, all arising in association with nodular hyperplasia: AAH (38 foci), atypical small acinar proliferation of uncertain significance (eight foci), and well-differentiated carcinoma (eight foci). Of 24 architectural and cytologic features evaluated, the following were useful in separating these three patterns: variation in nuclear size (14%, 22%, and 25%, respectively), mean nucleolar diameter (0.69 micron, 1.43 microns, and 1.78 microns, respectively), largest nucleolar diameter (mean, 1.66 microns, 2.71 microns, and 2.81 microns, respectively), percentage of nucleoli greater than 1 micron in diameter (17.6%, 58.1%, and 77.5%, respectively), crystalloids within suspicious glands (16%, 13%, and 75%, respectively), luminal basophilic mucinous secretions, infiltrative borders, discontinuity of the basal cell layer in AAH (compared with complete absence in carcinoma; shown with basal cell-specific anti-keratin monoclonal antibody 34 beta E12 immunostaining), and intact basement membrane in AAH (compared with discontinuity in carcinoma; shown with type IV collagen immunostaining). Features that could not reliably separate AAH from carcinoma included lesion shape, circumscription, multifocality, average gland size, variation in gland size and shape, nuclear shape, chromatin pattern, and amount and tinctorial quality of cytoplasm. Although the biologic significance of AAH is uncertain, its light microscopic appearance and immunophenotype allow it to be distinguished from carcinoma in most cases.