Melanomas with extensive metastasis can rarely regress on the appearance of a halo nevus (HN). This study explores the possible factors involved. The component melanocytes of HN, flatten, depigment and line vascular spaces to replace and result in the involution of the nevus. This simulates vasculogenesis in amelanotic melanomas, malignant melanocytes differentiating into endothelial cells. The reverse is seen in pigmented tumors. Nestin positive endothelial cells lining angiogenic tubes, enter the tumor margins, show glial differentiation and form transient tumor vascular complexes (TVC) with stepwise neural differentiation and pigment laden cells, suggesting transdifferentiation of endothelial cells to melanocytes. During development, a range of molecular tools are used by blood vessels as well as nerves, including ephrins/Eph, NP-I and Notch signalling. This is vindicated by morphologic evidence of melanocyte/endothelial transdifferentiation as shown in this study. These observations, suggest a common multipotent stem cell, differentiating into vascular and melanocyte/neural stem cell depending on the surrounding microenviroment. Concurrent tumor regression may involve a rapid transdifferentiation triggered by a molecular switch or shut down of the common stem cell and/or presence of circulating antibodies to melanomas released on the appearance of HN.