Type 1 leprosy reactions (T1R) are a major inflammatory complication of leprosy affecting 30 % of patients with borderline leprosy but there has been no diagnostic evaluation of the histological diagnosis of this entity. In a prospective study based in India skin biopsies were taken from 99 patients with clinically diagnosed reactions and 52 non-reactional controls. These were assessed histologically by four histopathologists whose assessments were then compared. Reactions were under-diagnosed with 32-62% of clinically diagnosed reactions being given that histological diagnosis. The pathologists had good specifities (range 72%- 93%) but much poorer sensitivities (range 42-78%). The most commonly reported histological features of TIR were cell maturity, oedema and giant cells. Five key variables were identified that the pathologists use in diagnosing a reaction: intra-granuloma oedema, giant cell size, giant cell numbers, dermal oedema and HLA-DR expression. A predictive model for the diagnosis of T1R was developed using stepwise logistic regression analysis with clinical diagnosis of reaction as an outcome and then identifying the key variables that each pathologist used in making the diagnosis of T1R. 34-53% of the variation between pathologists could be accounted for. The four pathologists used a similar diagnostic model and for all of them their estimations of epithelioid cell granuloma oedema, dermal oedema, plasma cells and Granuloma fraction estimation were significant variables in the diagnosis of T1R. Each pathologist then added in variables that were specific to them. This study has identified T1R as being under-diagnosed in comparison with clinical assessments. Key variables for diagnosing T1R have been established. This comparative masked study highlights the need for such studies in other inflammatory conditions.