Cysts lined by stratified squamous epithelium indistinguishable from the epidermis, referred to as epidermoid cysts, epidermal inclusion cysts, and infundibular cysts, are the most common type of cyst occurring in the skin. They are invariably benign, and malignant neoplasms arising within the wall of such cysts are distinctly uncommon. Even basal-cell carcinoma, which is the most common cutaneous malignant neoplasm of the skin, has rarely been reported to occur in association with epidermoid cysts. The authors report their experience studying 2 patients with basal-cell carcinoma arising in association with an epidermoid cyst. These cases highlight the need to examine, histopathologically, tissue from this common and usually benign lesion. The authors also review the medical literature.