Most models suggest that the cell of origin of papillary carcinoma is the mature thyroid follicular epithelial cell. In a recent study, p63 was detected in papillary carcinoma, Hashimoto's thyroiditis, and in squamoid aggregates and solid cell nests (SCNs), embryonic remnants found sporadically in the fully developed thyroid. In the present study, the relationship between solid cell nests and papillary carcinoma was investigated further. Four-micrometer sections from 88 routinely fixed and processed archival thyroidectomy specimens were pretreated with citric acid pH 6.0 for antigen retrieval, then incubated overnight with anti-p63 monoclonal antibody 4A4. Slides were stained with a streptavidin-biotin kit and diaminobenzidine as chromogen and were counterstained with hematoxylin. Squamoid aggregates or SCNs were noted in 21 specimens. Several morphologic variants of SCNs were found, all of which displayed p63 positivity. These included undifferentiated SCNs and those displaying commitment toward squamoid and ciliated glandular differentiation. Small, morphologically inconspicuous aggregates of p63-positive cells were commonly found in Hashimoto's thyroiditis. Commitment of p63-positive undifferentiated cells toward thyroid follicular epithelial differentiation was occasionally noted. One SCN variant, also associated with Hashimoto's thyroiditis, was a floretlike arrangement of p63-positive cells with fusiform nuclei. p63 staining was strong and uniform in some SCNs, but in other SCNs it was compartmentalized and homologous to stem cell-staining patterns in normal squamous or bronchial epithelia. Stem cell-like staining, associated with compartmentalized p63 staining or p63-positive undifferentiated cells, was noted in 7 of 27 papillary carcinomas. p63 immunostaining is a highly sensitive means of detecting SCNs. p63 expression patterns in SCNs and a subset of papillary carcinomas are closely homologous to stem cell-associated p63 staining patterns that have been described elsewhere in squamous and bronchial epithelia. We propose a stem-cell-associated model of papillary carcinoma oncogenesis that suggests that (1) p63-positive embryonal remnants rather than mature follicular cells are the cells of origin of a subset of papillary carcinomas; (2) these p63-positive cells are pluripotent and may stay undifferentiated or undergo benign squamoid or glandular maturation, may undergo thyroid follicular epithelial differentiation, may undergo oncogenic change leading to papillary carcinoma, or may trigger an immune reaction, resulting in lymphoid infiltration and Hashimoto's thyroiditis; and (3) Hashimoto's thyroiditis and papillary carcinoma may therefore be linked etiologically, because both disorders may be initiated by the same population of pluripotent p63-positive embryonal stem cell remnants.