We describe the clinical and pathological features of 41 palisaded encapsulated neuromas. They present as small, solitary, asymptomatic papules, predominantly on the face in middle age. No case had co-existent neurofibromatosis or multiple mucosal neuromas. Histologically, they have distinctive features, consisting of a proliferation of Schwann cells and large numbers of axons within a perineurial derived capsule, permitting simple and reliable distinction from schwannomas and neurofibromas. Overall, the palisaded encapsulated neuroma accounts for approximately 25% of all nerve sheath tumours of the dermis. True schwannomas rarely occur in the dermis. Despite their original name, many cases are incompletely encapsulated and we support the recent proposal to rename these lesions solitary circumscribed neuroma.