WNT signalling orchestrates a number of developmental programs1,2,3. In response to this stimulus, cytoplasmic β-catenin (encoded by CTNNB1 ) is stabilized, enabling downstream transcriptional activation by members of the LEF/TCF family4,5. One of the target genes for β-catenin/TCF encodes c-MYC, explaining why constitutive activation of the WNT pathway can lead to cancer, particularly in the colon6. Most colon cancers arise from mutations in the gene encoding adenomatous polyposis coli (APC), a protein required for ubiquitin-mediated degradation of β-catenin7, but a small percentage of colon and some other cancers harbour β-catenin–stabilizing mutations (refs 8,9,10,11, 12,13,14,15,16, 17). Recently, we discovered that transgenic mice expressing an activated β-catenin are predisposed to developing skin tumours resembling pilomatricomas18. Given that the skin of these adult mice also exhibits signs of de novo hair-follicle morphogenesis, we wondered whether human pilomatricomas might originate from hair matrix cells and whether they might possess β-catenin–stabilizing mutations. Here, we explore the cell origin and aetiology of this common human skin tumour. We found nuclear LEF-1 in the dividing tumour cells, providing biochemical evidence that pilomatricomas are derived from hair matrix cells. At least 75% of these tumours possess mutations affecting the amino-terminal segment, normally involved in phosphorylation-dependent, ubiquitin-mediated degradation of the protein. This percentage of CTNNB1 mutations is greater than in all other human tumours examined thus far, and directly implicates β-catenin/LEF misregulation as the major cause of hair matrix cell tumorigenesis in humans.