Background: Nevus sebaceus (NS) (organoider nevus) may frequently be associated with the development of a number of benign and malignant neoplasms among which basaloid neoplasms are the most common. Histopathologic criteria for diagnosis and classification of basaloid proliferations arising in NS are still debated. Most previous investigators have considered them to represent mainly basal cell carcinomas (BCCs). On the contrary, a number of recent authors have proposed that most basaloid neoplasms in NS exhibit predominantly morphologic features implying benignancy, thus representing trichobalstomas (TBs). In this study, we attempted to characterize better the histopathologic features of basaloid neoplasms in NS in a large series based on current morphologic criteria. Methods: Three‐hundred and sixteen cases of NS seen over 19 years were consecutively sampled and reviewed for basaloid neoplasms. Twenty‐four cases of basaloid neoplasms in NS were identified and categorized based on current histopathologic criteria either as TB or BCC. For comparison of histopathologic features, 37 solitary TB were also studied. Results: Following histopathologic analysis, 22 cases were categorized as TB (91.6%, 10 males, 12 females; mean age 40.8 years, range 19–78 years) and 2 cases as BCC (8.4%, 1 male, 1 female; 32 years and 40 years). Clinical features in both groups were generally similar. The lesions presented exclusively on the head and neck as skin colored to pigmented papules or nodules within NS (scalp in 19 TB cases and 1 BCC case; face in 2 TB cases and 1 BCC case; neck in 1 TB case). Histopathologically, TB in NS were characterized by smooth‐bordered basaloid aggregations with either a nodular and/or a superficial pattern, abundant fibrous stroma with focal clefts within the stroma, and prominent features of limited follicular differentiation (rudimentary follicular germs in concert with papillae). In contrast, BCC in NS showed basaloid aggregations that vary markedly in size and shape, scant fibrous stroma, focal mucinous clefts between basaloid aggregations and surrounding stroma, and lack of prominent rudimentary follicular germs in concert with papillae. Remarkably, sections in a few cases of TB showed features occasionally found in BCCs but presently widely considered to be unspecific (e.g., ulceration, cystic degeneration, and focal clefts between basaloid aggregations and surrounding stroma). Two cases of TB in NS were associated with a sebaceoma and 1 case with a desmoplastic trichilemmoma. Follow‐up data in 14 TB cases and 2 BCC cases (mean follow‐up 28.8 months; range 1 to 160 months) revealed no local recurrences or distant metastases. Conclusion: Our study confirms that the vast majority of the basaloid neoplasms arising in NS show clear‐cut morphologic criteria for TB, whereas only a few cases display histopathologic features consistent with BCC. In a minority of cases, basaloid neoplasms with overall morphologic features of TB may present problems in diagnosis when they exhibit a few histopathologic features traditionally associated with BCC or when they occur in combination with other adnexal neoplasms.