Background: It is well established that inflammation promotes cancer, including melanoma, although the exact mechanisms involved are less known. In this study, we tested the hypothesis that inflammatory factors affect the cancer stem cell (CSC) compartment responsible for tumor development and relapse. Results: Using an inducible histone 2B-GFP fusion protein as a tracer of cell divisional history, we determined that tumor necrosis factor (TNF), which is a classical pro-inflammatory cytokine, enlarged the CSC pool of GFP-positive label-retaining cells (LRCs) in tumor-like melanospheres. Although these cells acquired melanoma stem cell markers, including ABCB5 and CD271, and self-renewal ability, they lost their capacity to differentiate, as evidenced by the diminished MelanA expression in melanosphere cells and the loss of pigmentation in a skin equivalent model of human melanoma. The undifferentiated cell phenotype could be reversed by LY294002, which is an inhibitor of the PI3K/AKT signaling pathway, and this reversal was accompanied by a significant reduction in CSC phenotypic markers and functional properties. Importantly, the changes induced by a transient exposure to TNF were long-lasting and observed for many generations after TNF withdrawal.