An extremely unusual case of epidermoid cyst showing diffuse parakeratosis and aggressive clinical behavior is presented. A destructive bone lesion with surrounding ill-defined soft tissue lesion was found by computed tomography in a 63 year-old man complaining of painful swelling of the right buttock. He had a history of surgical excision twice for epidermoid cysts of soft tissue of the right hip during recent one year. On aspiration cytology, the aspirate was highly cellular and mostly composed of desquamated nucleated squamous cells. Operation finding revealed that the iliac bone was irregularly destroyed and filled with gray-white cheesy material and necrotic bone debris. Adjacent gluteus muscle showed scattered gray-white lesions. The curettage specimen showed bone necrosis and desquamated squamous cells filling the marrow spaces. The lesion within muscle revealed epidermoid cyst with diffuse parakeratosis.