Although plexiform neurofibroma (PN) is thought to represent a benign neoplasm with the potential for malignant transformation (malignant peripheral nerve sheath tumor; MPNST), its neoplastic nature has been difficult to prove due to cellular heterogeneity, which hampers standard molecular genetic analysis. Its mixed composition typically includes Schwann cells, fibroblasts, perineurial-like cells, and mast cells. Although NF1 loss of heterozygosity has been reported in subsets of PNs, it remains uncertain which cell type(s) harbor these alterations. Using a dual-color fluorescence in situ hybridization and immunohistochemistry technique, we studied NF1 gene status in S-100 protein-positive and -negative cell subpopulations in archival paraffin-embedded specimens from seven PNs, two atypical PNs, one cellular/atypical PN, and eight MPNSTs derived from 13 patients, seven of which had neurofibromatosis type 1 (NF1). NF1 loss was detected in four of seven PNs and one atypical PN, with deletions entirely restricted to S-100 protein-immunoreactive Schwann cells. In contrast, all eight MPNSTs harbored NF1 deletions, regardless of S-100 protein expression or NF1 clinical status. Our results suggest that the Schwann cell is the primary neoplastic component in PNs and that S-100 protein-negative cells in MPNST represent dedifferentiated Schwann cells, which harbor NF1 deletions in both NF1-associated and sporadic tumors.