This review summarizes current diagnostic problems and advances with regard to patterns of inflammation and dysplasia in ulcerative colitis and Crohn's disease. Ulcerative colitis and Crohn's disease have a variety of characteristic but non-specific pathologic features. In approximately 5% of inflammatory bowel disease cases, a definite diagnosis of ulcerative colitis or Crohn's disease cannot be established, in which case the term "indeterminate" colitis is used. Most cases of indeterminate colitis are related to fulminant colitis, a condition in which the classic features of ulcerative colitis or Crohn's disease may be obscured by severe ulceration with early superficial fissuring ulceration, transmural lymphoid aggregates, and relative rectal sparing. Approximately 20% of patients with indeterminate colitis develop severe pouch complications, which is intermediate in frequency between ulcerative colitis (8-10%) and Crohn's disease (30-40%). In order to establish a diagnosis of ulcerative colitis or Crohn's disease, it is important to evaluate pathologic material in conjunction with clinical, laboratory, radiologic, and endoscopic features and to recognize the variety of changes that may be seen in fulminant ulcerative colitis. There are a number of exceptions to the classic principles of inflammatory bowel disease pathology that may lead to diagnostic confusion. For instance, apparent skip lesions on biopsy analysis may occur in patients with ulcerative colitis in the following settings; long term oral or topical therapy, focal ascending colon, cecum and/or appendiceal involvement in patients with left sided ulcerative colitis, upper gastrointestinal involvement in patients with ulcerative colitis, and at initial presentation of ulcerative colitis in pediatric patients. In all of these circumstances, the finding of patchy disease and/or rectal sparing should not be misinterpreted as either evidence against a diagnosis of ulcerative colitis, or as representing skip areas characteristic of Crohn's disease. Patients with ulcerative colitis and Crohn's disease are at increased risk for the development of dysplasia and carcinoma. Recent studies suggest that given a similar duration and extent of disease, patients with Crohn's disease have a similar risk of dysplasia and cancer as patients with ulcerative colitis. Dysplasia in ulcerative colitis may be classified as flat or elevated (dysplasia associated lesion or mass [DALM]). Patients with flat high grade dysplasia are generally treated with colectomy. However, there is recent evidence to suggest that patients with flat low grade dysplasia, particularly if detected at the time of initial endoscopic exam, or if its multifocal or synchronous, should also be treated with colectomy. Elevated lesions in ulcerative colitis (DALM) are subdivided into "adenoma-like" and "non-adenoma-like" lesions based on their endoscopic appearance. Recent data suggests that adenoma-like lesions, regardless of the grade of dysplasia, or the location of the lesion (i.e., inside or outside areas of established colitis) may be treated adequately by polypectomy if there are no other areas of flat dysplasia in the patient. Although there are some histologic and molecular features that can help differentiate sporadic adenomas from adenoma-like polypoid dysplastic lesions related to ulcerative colitis, none of these adjunctive techniques can help distinguish these lesions definitively in any single patient. Patients with a non-adenoma-like DALM, (irregular, broad based, or strictured lesion) should be treated with colectomy because of the high probability of adenocarcinoma. The surveillance and treatment options for patients with flat and elevated dysplasia in ulcerative colitis are reviewed in detail.