A 73-year-old man presented with a 4-mm asymptomatic, smooth, dome-shaped lesion on the right fourth finger with a clinical impression of a cyst/dermatofibroma. Histological examination showed a trichilemmal cyst with 3 nests of small blue round cells within the basal layer of the cyst lining. There were many mitotic figures and apoptotic bodies. The stain for cytokeratin 20 “decorated” the tumor cells with an unequivocal perinuclear dot-like pattern, confirming their Merkel cell origin. Dermal Merkel cell carcinoma (MCC) arising in association with benign adnexal tumors or cysts, with or without epithelial involvement, is a rare event. MCC in situ in this context has not been previously reported. The immunostain for cytokeratin 20 is an important ancillary study in diagnosing MCC. Our case supports the view that a subset of MCCs is of intraepithelial origin and underscores the clinical importance of surveillance for changes in an “innocent” cyst.