A teratoma is a rare type of germ cell tumor that may contain immature or fully formed tissue, including teeth, hair, bone and muscle. Teratomas may be cancerous or noncancerous, and they can affect people of all ages. Treatment involves surgical removal. What Causes Teratoma? Teratomas happen when complications arise during your cells' differentiation process. In particular, they develop in your body's germ cells, which are undifferentiated. This means they can turn into any type of cell – from egg and sperm to hair cells.