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An immunohistochemical study was conducted of 108 papillary carcinoma cases, including 48 cases with intratumoral heterotopic ossification (IHO). In 48 cases, papillary carcinoma with IHO was accompanied by nodular fibrosis. Cases of papillary carcinoma with IHO or nodular fibrosis showed higher incidences of lymph node metastasis, multifocal lesions, and extrathyroidal invasion than those without IHO and nodular fibrosis. A higher number of stromal myofibroblasts was observed in papillary carcinoma with IHO or nodular fibrosis than in that without fibrosis. Expression of both basic fibroblast growth factor (bFGF) and bone morphogenetic protein (BMP)–2 was the highest in papillary carcinoma with IHO. Papillary carcinoma with IHO showed higher vascular invasion and higher numbers of capillaries expressing nestin, which is associated with high expression of vascular endothelial growth factor (VEGF). Papillary carcinoma with IHO is a unique subtype with extensive progression including frequent lymph node metastasis, multifocality, and invasive behavior. Papillary carcinoma with IHO was correlated with expression of bFGF, BMP-2, and VEGF in the carcinoma cells, leading to neovascularization.