In recent years, there have been several important refinements in the classification of cutaneous mesenchymal neoplasms, including the description of new tumour types, along with the identification of novel and recurrent molecular genetic findings. In addition to providing new insights into tumour biology, many of these advances have had significant clinical consequences with regard to diagnostics, management, and prognostication. Newly described entities include pseudomyogenic haemangioendothelioma, haemosiderotic fibrolipomatous tumour, and fibroblastic connective tissue naevus, which are reviewed in the context of the principal differential diagnoses and significant clinical implications. Genetic characterization of several soft tissue tumour types that occur in the skin has resulted in the identification of diagnostically useful markers: ALK gene rearrangement with corresponding ALK protein expression by immunohistochemistry in epithelioid fibrous histiocytoma; the WWTR1-CAMTA1 fusion gene with CAMTA1 protein expression in epithelioid haemangioendothelioma; MYC amplification and overexpression in radiation-associated angiosarcoma; and EWSR1 gene rearrangement in cutaneous myoepithelial tumours. Finally, the classification of intradermal smooth muscle tumours and unclassified/pleomorphic dermal sarcoma has been refined, resulting in both improved classification and improved prognostication. Many of the tumour types listed above are encountered not only by specialist dermatopathologists, but also by practising general surgical pathologists, and this review should therefore provide a widely applicable update on the histological and molecular classification of cutaneous mesenchymal neoplasms, along with the appropriate use of ancillary diagnostic tests, in particular immunohistochemistry, in the evaluation of such lesions and their histological mimics.