Studies of basal cell carcinoma using terahertz pulsed imaging have revealed a significant difference between regions of tumor and healthy tissue. These differences are manifested in the reflected pulse due to what is thought to be changes in refractive index and absorption. We present measurements of the refractive index and absorption coefficient of excised normal tissue and basal cell carcinoma using terahertz ( THz ) transmission spectroscopy. We extract Debye parameters from these data and enter them into a finite difference time domain simulation to predict the shape of the waveforms reflected off the normal tissue and basal cell carcinoma and compare them with published in vivo data. Simulating the interaction of terahertz radiation with normal and cancerous tissue is a key step toward understanding the origin of contrast in terahertz images of skin cancer. (C) 2005 Society of Photo- Optical Instrumentation Engineers.