Squamous morules are a common component of premalignant glandular lesions that are followed by glandular, rather than squamous, carcinomas. We tested the hypothesis that the appearance of glands associated with morules predicts cancer risk, and undertook molecular testing to determine the clonal and hormonal response properties of admixed squamous and glandular elements. A total of 66 patients with squamous morules in an index endometrial biopsy had follow-up clinical data (average follow-up: interval 31 months, 2.5 biopsies) showing development of carcinoma in 11% (7/66) of cases. The histological appearance of morule-associated glands in the index biopsy was significantly associated with this clinical outcome, with the majority (71%, 5/7) of cancer occurrences following an overtly premalignant lesion (endometrial intraepithelial neoplasia) with squamous morules. Eight endometrial intraepithelial neoplasias with squamous morules were examined by immunohistochemistry for estrogen and progesterone receptors and mitotic activity (Ki-67 antigen percent stained). Glandular components had abundant estrogen and progesterone receptors, and high levels of mitotic activity in all cases. In sharp contrast, all squamous morules were devoid of sex hormone receptors and had undetectable or extremely low-proliferation rates. When mutated, the same specific PTEN mutation was detected in squamous and glandular elements, indicating that both are of common lineage. The clinical and laboratory data are consistent with a model of morule biology in which squamous morules are a hormonally incompetent subpopulation of endometrial glandular lesions. Isolated morules might result from artifactual displacement from their native glandular context, or selective hormonally induced regression of the glandular but not squamous components over time. Subsequent cancer risk, as promoted by estrogens, is greatest when the glandular component has the appearance of endometrial intraepithelial neoplasia. Even isolated morules should be carefully followed, however, to exclude a coexisting undersampled, or occult, glandular lesion.