Step 1: The key histological clue is spindle-shaped cells with Verocay bodies.
Step 2: Schwannoma is a benign nerve sheath tumour of Schwann cells. Microscopically it shows cellular, compact Antoni A areas alternating with loose, hypocellular Antoni B areas. Within Antoni A zones, the nuclei line up in palisades around eosinophilic processes to form Verocay bodies, which is pathognomonic.
Step 3: Nerve fibres are stretched over the capsule, not within the tumour, and the cells are strongly S-100 positive. Neurofibroma, by contrast, has nerve fibres running through it and lacks Verocay bodies.
Conclusion: Verocay bodies make the diagnosis schwannoma.
Ref: Robbins and Cotran Pathologic Basis of Disease.