Xanthogranulomatous inflammation (XGI) is a rare benign inflammatory disease characterized by aggregation of lipid-laden foamy macrophages. This disease entity has been described in various organs but most commonly in the kidney and gallbladder. The occurrence of this disease in the lower gastrointestinal tract is extremely rare. Its clinical importance is that it can be misdiagnosed as an infiltrative cancer. In this case report, a 52-year-old male complained of right lower quadrant abdominal pain for a period of 3 months. Abdominal computed tomography revealed appendiceal mass and colonoscopy revealed multiple erythematous nodular lesions in the terminal ileum and appendiceal orifice, mimicking appendiceal cancer. Right hemicolectomy was done and the pathological specimen revealed XGI of the terminal ileum. To our knowledge, this is the first case of XGI in terminal ileum presenting as abdominal pain and the appendiceal mass on radiologic findings.