Phakomatosis pigmentovascularis (PPV) is a diagnosis which denotes the coexistence of pigmentary and vascular birthmarks of specific types, accompanied by variable multisystem involvement including central nervous system disease, asymmetrical growth and a predisposition to malignancy. Using a tightly phenotyped group and high depth next generation sequencing of affected tissues we discover here clonal mosaic variants in gene PTPN11 encoding SHP2 phosphatase as a cause of PPV type III or spilorosea. Within an individual the same variant is found in distinct pigmentary and vascular birthmarks and is undetectable in blood. We go on to demonstrate that the same variants can cause either the specific pigmentary or vascular phenotypes alone, as well as driving melanoma development within the pigmentary lesion. Protein conformational modelling highlights that while variants lead to loss of function at the level of the phosphatase domain, resultant conformational changes promote longer ligand binding. In vitro modelling of the missense variants confirms downstream MAPK pathway overactivation, and widespread disruption of human endothelial cell angiogenesis. Importantly, PTPN11-mosaic patients theoretically risk passing on the variant to their children as the germline RASopathy Noonan syndrome with lentigines. These findings improve our understanding of the pathogenesis and biology of naevus spilus and capillary malformation syndromes, paving the way for better clinical management