Abstract BACKGROUND There is continuous debate regarding the optimal classification, prognosis, and treatment of the follicular variant of papillary thyroid carcinoma (FVPTC). The objective of this study was to assess the behavior of FVPTC, especially its encapsulated form, and shed more light on its true position in the classification scheme of well differentiated thyroid carcinoma. METHODS All patients with FVPTC, follicular thyroid adenoma (FTA), and follicular thyroid carcinoma (FTC) who were diagnosed between 1980 and 1995 were reviewed and reclassified according to the currently accepted definition of FVPTC. The tumors were separated into encapsulated and nonencapsulated (infiltrative/diffuse) types. Encapsulated tumors were subdivided further into tumors with or without capsular/vascular invasion. These different subtypes of FVPTC were correlated with outcome and with other clinicopathologic parameters. RESULTS After review by 4 pathologists, 78 patients were included in the study. Sixty‐one of 78 patients (78%) had encapsulated tumors (18 invasive, 43 noninvasive), and 17 patients had nonencapsulated tumors (infiltrative/diffuse). The gender distribution, age at presentation, and tumor size did not differ between patients with encapsulated and nonencapsulated FVPTC. Patients who had encapsulated FVPTC had a significantly lower rate of marked intratumor fibrosis (18%), extrathyroid extension (5%), and positive margins (2%) compared with patients who had nonencapsulated tumors (88%, 65%, and 50% respectively; P < .0001). Regional lymph node metastases were present in 14 of 78 patients (18%), and no patients had distant metastases. The lymph node metastatic rate was significantly higher in patients who had nonencapsulated tumors (11 of 17 patients; 65%) compared with patients who had encapsulated neoplasms (3 of 61 patients; 5%; P < .0001). In addition, lymph node metastases were not detected in any noninvasive, encapsulated FVPTCs. With a median follow‐up of 10.8 years, only 1 patient developed a recurrence, which occurred in an encapsulated FVPTC that had numerous invasive foci. None of the patients with noninvasive, encapsulated FVPTCs developed recurrences, including 31 patients who underwent lobectomy alone, with a median follow‐up of 11.1 years. CONCLUSIONS FVPTC appeared to be a heterogeneous disease composed of 2 distinct groups: an infiltrative/diffuse (nonencapsulated) subvariant, which resembles classic papillary carcinoma in its metastatic lymph node pattern and invasive growth, and an encapsulated form, which behaves more like FTA/FTC. Patients who had noninvasive, encapsulated FVPTCs did not develop lymph node metastases or recurrences and could be treated by lobectomy alone. If the current findings are confirmed, then strong consideration should be given to reclassifying encapsulated FVPTC as an entity that is close to the FTA/FTC class of tumors. Cancer 2006. © 2006 American Cancer Society.