Balloon cell malignant melanoma (BCMM) is a rare histologic variant of malignant melanoma (MM). Thirty-four patients with BCMM from the files of the Armed Forces Institute of Pathology (AFIP) were studied by means of clinicopathologic correlation and histochemical, immunohistochemical, and ultrastructural methods to better define this entity. The cytoplasmic features of the balloon cells observed in BCMM resemble those noticed in balloon cell nevus (BCN), but the presence of nuclear pleomorphism, atypia, and mitoses and the absence of intervening stroma help distinguish BCMM. The cells also show many histochemical, immunochemical, and ultrastructural features of conventional melanoma cells. Although it is generally believed that balloon melanoma cells represent a degenerative change, the immunohistochemical and electron microscopic findings suggest that the balloon tumor cells are most likely metabolically active melanocytic cells. Microscopically, BCMM also must be differentiated from other clear cell tumors such as clear cell sarcoma (MM of soft parts), hibernoma, xanthoma, sebaceous neoplasms, metastatic renal cell carcinoma, (malignant) clear cell acrospiroma, (malignant) granular cell tumor, granular (clear) cell basal cell carcinoma, clear cell syringoma, and atypical fibroxanthoma. The prognosis of BCMM usually correlates with the tumor thickness similar to that in other histologic types of cutaneous MM. Nineteen (57.5%) of 33 patients with adequate follow-up information died of disseminated tumors from 2 months to 12 years after the initial treatment. Six (18.2%) patients developed local recurrences: four of these patients died of metastasis and two were alive with metastatic tumor at last contact. Five (15.2%) patients were alive with metastatic tumors, and seven (21.2%) were alive without evidence of disease at last contact. Recognition of BCMM is important because of its malignant biologic behavior.