Gene expression profiling reveals four distinct subgroups of multiple myeloma that have significant correlation with various clinical characteristics. Diagnosis for multiple myeloma (and possibly monoclonal gammopathy of undetermined significance) based on differential expression of 14 genes, as well as prognosis for the four subgroups of multiple myeloma based on the expression of 24 genes are established. A 15-gene model that classifies myeloma into 7 groups is also reported. Gene expression profiling also allows placing multiple myeloma into a developmental schema parallel to that of normal plasma cell differentiation. Development of a gene expression- or developmental stage-based classification system for multiple myeloma would lead to rational design of more accurate and sensitive diagnostics, prognostics and tumor-specific therapies for multiple myeloma.