Proliferating cutaneous epithelial cyst is classified into two subtypes, proliferating trichilemmal cyst and proliferating epidermoid cyst, depending on the mode of keratinization or the origin of the tumors. Proliferating epidermoid cyst is a subepidermal cystic tumor showing, at least in focal areas, a cystic wall lined by epithelium typically seen in epidermoid cyst. We report a case of proliferating epidermoid cyst in a 58-year old man who had a 3x4 cm sized egg shaped cystic tumor on the occipital area of the scalp. Histopathologic examination revealed the tumor was a large epidermoid cyst and a portion of epithelial proliferation projected from the cyst wall into the dermis. The epithelial proliferation was surrounded by paucicellular fibrous stroma.