Background: Although molluscum contagiosum (MC) resolves spontaneously, there are several reasons to treat this dermatological disorder. Objective: To evaluate the safety and efficacy of 5% imiquimod cream versus 10% potassium hydroxide (KOH) solution in treating MC, and to propose the mechanism of cure by observing the histological findings. Methods: Imiquimod or KOH were applied by the patient or a parent 3 days per week until all lesions cleared. The number of MC lesions was counted and side effects were evaluated at 5 points during the treatment (the initial visit, week 2, week 4, week 8, and week 12). Histological changes were compared between 2 patients of each group, before and after the 2 weeks of application. Results: In both group, the mean lesion counts decreased all through to week 12, and the reduction in number of lesions were statistically significant in both groups (p<0.005). Over 40% of each group developed local side effects, and no systemic side effects were noted in either group. Before treatment, histological findings showed little or no dermal infiltrates. After treatment, specimens showed dense lymphocytic infiltrates, especially T cells, around the lesions which had resolved. Conclusion: Both 10% KOH solution and 5% imiquimod cream are effective and safe treatment of MC.