Intraductal papillary neoplasms of the biliary tree are unusual lesions characterized by solitary or diffuse growth along the intra- and/or extrahepatic biliary tract. Biliary papillary neoplasms bear some clinicopathologic similarity to intraductal papillary mucinous neoplasms of the pancreas. Like intraductal papillary mucinous neoplasms of the pancreas, biliary papillary neoplasms can be purely intraductal lesions or can give rise to invasive adenocarcinomas. We recently studied the genetic alterations present in a series of biliary papillary neoplasms and noted the presence of allelic shifts in some biliary tumors during allelic loss assays on chromosomes 5q and 18q. This suggested that microsatellite instability might play a role in the molecular pathogenesis of biliary papillary neoplasms. Genomic DNA was extracted from 17 intraductal papillary neoplasms, 6 associated invasive cholangiocarcinomas, and corresponding normal tissues, and microsatellite instability testing was performed using the 5 microsatellite loci recommended by the 1997 National Cancer Institute-sponsored consensus conference (D2S123, D5S346, D17S250, Bat-25, and Bat-26). High-level microsatellite instability was considered to be present when at least two of five microsatellite loci showed allelic shifts, and low-level microsatellite instability, when only one locus was shifted, as per the National Cancer Institute criteria. We also determined the methylation status of the DNA mismatch repair gene hMLH1 by bisulfite treatment of genomic DNA, followed by methylation-specific PCR. High-level microsatellite instability was present in 2 of 17 (11.8%) biliary papillary neoplasms, including 1 case of purely intraductal tumor and 1 case with both intraductal and invasive cholangiocarcinoma components. In both cases there was extensive microsatellite instability, with allelic shifts in five of five and four of five microsatellite markers, respectively. Low-level microsatellite instability was present in 6 of 17 (35.3%) biliary papillary neoplasms, including 2 cases of purely intraductal tumor and 4 cases with both intraductal and invasive cholangiocarcinoma components. Interestingly, the pattern of allelic shifts was frequently not identical between the intraductal and invasive cholangiocarcinoma components; although the same microsatellite markers were shifted, alleles of differing lengths were generated in the intraductal and invasive components of the neoplasms with high-level microsatellite instability and of two neoplasms with low-level microsatellite instability. None of the biliary papillary neoplasms (0 of 10 cases with adequate DNA for evaluation) showed methylation of hMLH1. These results indicate that microsatellite instability is a relatively frequent event in papillary neoplasms of the biliary tree but is not associated with hMLH1 promoter hypermethylation. The finding that alleles of differing lengths were frequently generated between the intraductal and invasive components of those tumors with microsatellite instability suggests that there is significant genetic heterogeneity within these neoplasms.