Noninvasive thyroid nodules that exhibit borderline morphological signs of papillary cancer are difficult to diagnose and we do not know if they represent papillary carcinoma precursor lesions. Forty-six such nodules were analyzed for RET activation by immunohistochemistry and, in selected cases, by reverse transcriptase-polymerase chain reaction performed on RNA extracted after laser capture microdissection (LCM) of the tumor foci with and without papillary carcinoma features and positive RET immunoreactivity. RET immunoreactivity was identified, at least focally, in 30 of 46 (65.2%) of the nodules where it closely paralleled the morphological changes. Enough RNA was obtained after LCM in seven samples. RET/PTC1 or RET/PTC3 were detected in microscopic foci with papillary carcinoma features in most of the thyroid nodules (five of seven cases). No RET/PTC1 or RET/PTC3 rearrangements were detected in areas of the same tumors that lacked the cytological alterations. Analysis of clonality in the same nodules selected for LCM demonstrated that two were monoclonal and six were polyclonal. We conclude that RET activation closely parallels the morphological changes, that it is restricted to those areas of the tumor with the cytological alterations and that it is detectable in both mono- and polyclonal tumors. Although the finding of microscopic foci indicative of papillary carcinoma in a hyperplastic or adenomatous nodule does not justify the interpretation of the entire lesion as papillary carcinoma, it is possible that such foci may precede the development of invasive papillary cancer.