Keratoacanthomas (KAs) are self-limiting squamoproliferative lesions usually seen on sun damaged skin. These tumours are in many ways enigmatic, and the relation between KAs and squamous cell carcinoma is still a contested topic. In this review the biology and histology of KAs will be discussed, and based on morphology, clinical outcome and recent genetic analysis of the tumour types, we conclude that KAs and SCCs are two distinct biological entities which can usually be distinguished by conventional microscopy. The sentinel observation of rapid and frequent appearance of KAs after BRAF treatment of malignant melanoma patients has paved the way for a more general understanding of the pathogenesis leading to the appearance of KAs in patients with inflammation in the skin. In BRAF treated patients, the KAs are a consequence of paradoxical activation of the MAP kinase pathway. Similarly, any external trauma or pharmaceutical interventions resulting in inflammation in the skin will activate the MAP kinase pathway. Such inflammation-mediated MAP kinase activation in the skin will result in the development of KAs through the same pathway as demonstrated for BRAF treated patients. It is characteristic that skin tumours following short acting inflammatory stimulation of severely sun damaged skin develop almost exclusively into KAs, whereas it is exceedingly rare that such inflammatory conditions lead to formation of SCCs. The understanding that inflammatory reactions in sun-damaged skin may activate pathways specifically leading to the formation of KAs may spare the patient the discomfort and disfigurement of needless overtreatment.