A dermoid cyst of the penis has not been documented previously in the literature. We report a young Caucasian who had an important swelling of the penis dating back several months. On examination a subcutaneous mass on the dorsal aspect of the shaft and prepuce was present. A cutaneous sinus discharging purulent material was also noted above the mass. Laboratory tests including serology for syphilis and bacteriologic examination were negative. An excisional biopsy revealed a nodular lesion in the subcutaneous tissue with tufts of hair emerging from the surface. Histopathologic examination disclosed granulation tissue containing fragments of hair surrounded by granulomatous infiltrate. Serial sections allowed identification of a subcutaneous cyst. The wall was epidermoid and connected with several pilosebaceous units. A sinus tract lined by stratified squamous epithelium contiguous with the epidermis was also noted. Clinical and histopathologic differential diagnoses are discussed. Evidence for a congenital origin of this condition is given.