OBJECTIVE: Inappropriate treatment at early stage of wound could result in the formation of pseudoepitheliomatous granuloma (PEG). The correlation of abnormal transdifferentiation of epithelial cells to immunologic cells and the occurrence of PEG lesion was investigated. METHODS: Morphological change of epithelial tissue was observed with histopathology in 11 specimens of PEG lesions and 6 specimens of normal skins from PEG edge (PEG-N) from 11 patients with damaged skin. The expression characteristics and distribution of pan-cytokeratin (CKp), IV type collagen, laminin (LM), epithelial cadherin (E-Cad), beta-catenin (beta-Cat), focal adhesion kinase (FAK), stem cell factor (SCF) and its receptor-c-Kit, proliferating cell nuclear antigen(PCNA), and cluster of differentiation-14 (CD14), CD68 and mast cell tryptase (MCT) in PEG were detected with the immunohistochemical and the indirect immunofluorescent double-staining. RESULTS: In comparison with PEG-N, epithelial tissue take on squamous metaplasia, and stroma was infiltrated with intensive microvessels and inflammatory cells in the PEG lesion. Poor epithelial basal layer constitution, basal polarization, and migration of basal cells to stroma could be observed. In the ultrastructure, the loose intercellular junction of basal cells and the increased nucleus/cytoplasm ratio and intercellular space could be observed, neonatal monocytoid cells and macrophages and mast cells as a exuviate-like manner brooded from cytoplasm of original epithelial cells and basement membrane. protein expression of CKp and E-Cad by basal cells was significantly decreased, and the IV type collagen and LM protein could not be found in basement membrane of identical locus. By contrast, the immunoreactivity of beta-Cat and FAK was apparently increased. In addition, CD14(+) monocytes, CD68(+) macrophages, MCT(+) mast cells and CD68(+)/MCT(+) cells with various size, and these cells of stronger immuno-staining of SCF, c-Kit and PCNA antigen could be found in epithelial tissue and stroma. CONCLUSION: Epithelial cells in PEG related to wound are characteristized by transdifferentiation of epithelial cells to immunologic cells, wich may be associated with local infectious and inflammatory reaction, ultimately resulting in enhancement the ratio of beta-Cat/E-Cad signal and activation SCF-c-Kit signal pathway. The phenomena of transdifferentiation epithelial cells in the PEG lesion will help to recognize of the neoplatic immune and trauma repair mechanism.