Benign melanocytic nevi frequently emerge when an acquired BRAF^V600E mutation triggers unchecked proliferation and subsequent arrest in melanocytes. Recent observations have challenged the role of oncogene-induced senescence in melanocytic nevus formation, necessitating investigations into alternative mechanisms for the establishment and maintenance of proliferation arrest in nevi. We compared the transcriptomes of melanocytes from healthy human skin, nevi, and melanomas arising from nevi and identified a set of microRNAs as highly expressed nevus-enriched transcripts. Two of these microRNAs-MIR211-5p and MIR328-3p-induced mitotic failure, genome duplication, and proliferation arrest in human melanocytes through convergent targeting of AURKB. We demonstrate that BRAF^V600E induces a similar proliferation arrest in primary human melanocytes that is both reversible and conditional. Specifically, BRAF^V600E expression stimulates either arrest or proliferation depending on the differentiation state of the melanocyte. We report genome duplication in human melanocytic nevi, reciprocal expression of AURKB and microRNAs in nevi and melanomas, and rescue of arrested human nevus cells with AURKB expression. Taken together, our data describe an alternative molecular mechanism for melanocytic nevus formation that is congruent with both experimental and clinical observations.