Palisaded encapsulated neuroma (PEN), also known as solitary circumscribed neuroma, is a rare, benign tumor of neuronal origin, often located on the head or neck. We present a case involving a 77-year-old Middle Eastern woman with a slowly enlarging, slightly symptomatic lesion on her upper lip. Histopathological analysis following a shave biopsy revealed the lesion to be a PEN. Accurate diagnosis is crucial to avoid unnecessary testing or treatment for mimicking conditions such as basal cell carcinoma or neurofibroma. Following the removal of the patient's lesion, no additional treatment was necessary, and there was no recurrence.