Abstract. We present a three-dimensional Monte Carlo model of optical transport in skin with a novel approach to treatment of side boundaries of the volume of interest. This represents an effective way to overcome the inherent limitations of "escape" and "mirror" boundary conditions and enables high-resolution modeling of skin inclusions with complex geometries and arbitrary irradiation patterns. The optical model correctly reproduces measured values of diffuse reflectance for normal skin. When coupled with a sophisticated model of thermal transport and tissue coagulation kinetics, it also reproduces realistic values of radiant exposure thresholds for epidermal injury and for photocoagulation of port wine stain blood vessels in various skin phototypes, with or without application of cryogen spray cooling. C 2011 Society of Photo-Optical Instrumentation Engineers (SPIE).