Merkel cells are clear oval cells in the epidermis and outer root sheaths of hair follicles, which are probably of epithelial origin, share ultrastructural features with neuroendocrine cells, and are found in association with touch receptors. In the eyelid, they occur singly in the epidermis and external root sheaths of hairs and eyelashes, and in specialized touch spots alternating with eyelashes. Their typical electron microscopical and antigenic features include dense-core granules, intranuclear rodlets, spinous processes, and a positive reaction for specific cytokeratins, epithelial membrane antigen, neuron-specific enolase, chromogranin and synaptophysin. Merkel cell carcinoma probably develops from precursor cells which give rise to keratinocytes and Merkel cells, and nearly one out of ten Merkel cell carcinomas occur in the eyelid and periocular region. They tend to be bulging lesions near the lid margin of elderly patients, reddish in color, and erythematous with telangiectatic vessels. The diagnosis is based on the frequent presence of neurofilaments and paranuclear aggregates of intermediate filaments in addition to features typical of normal Merkel cells. The tumor often mimics lymphoma or undifferentiated carcinoma and frequently invades lymphatic vessels. One third of Merkel cell carcinomas recur, almost two thirds give rise to regional node metastases, and up to one half metastasize widely and result in death. Initial treatment should be prompt and aggressive, with wide resection and routine postoperative irradiation. Although metastatic lesions often respond to radiation therapy and cytostatic drugs, these treatments are mainly of palliative value.