Oral leukoplakia is the most common oral potentially malignant disorder with a malignant transformation rate into oral squamous cell carcinoma of 1–3% annually. The presence and grade of World Health Organization defined dysplasia is an important histological marker to assess the risk for malignant transformation, but is not sufficiently accurate to personalize treatment and surveillance. Differentiated dysplasia, known from differentiated vulvar intraepithelial neoplasia, is hitherto not used in oral dysplasia grading. We hypothesized that assessing differentiated dysplasia besides World Health Organization defined (classic) dysplasia will improve risk assessment of malignant transformation of oral leukoplakia. We investigated a retrospective cohort consisting of 84 oral leukoplakia patients. Biopsies were assessed for dysplasia presence and grade, and the expression of keratins 13 (CK13) and 17, known to be dysregulated in dysplastic vulvar mucosa. In dysplastic oral lesions, differentiated dysplasia is as common as classic dysplasia. In 25 out of 84 (30%) patients, squamous cell carcinoma of the upper aerodigestive tract developed during follow-up. Considering only classic dysplasia, 11 out of 56 (20%) patients with nondysplastic lesions progressed. With the incorporation of differentiated dysplasia, only 2 out of 30 (7%) patients with nondysplastic lesions progressed. The risk of progression increased from 3.26 (Hazard ratio, p = 0.002) when only classic dysplasia is considered to 7.43 (Hazard ratio, p = 0.001) when classic and differentiated dysplasia are combined. Loss of CK13, combined with presence of dysplasia, is associated with greater risk of malignant progression (p = 0.006). This study demonstrates that differentiated dysplasia should be recognized as a separate type of dysplasia in the oral mucosa and that its distinction from classic dysplasia is of pathological and clinical significance since it is a strong (co)prognostic histopathological marker for oral malignant transformation. In oral lesions without dysplasia and retained CK13 staining the risk for progression is very low.