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Merkel cell carcinoma (MCC) is a rare, frequently lethal, primary neuroendocrine carcinoma of the skin. Histopathologically, it appears as a dermal nodule of small, undifferentiated malignant cells. Historically, MCC was considered to be an eccrine carcinoma. Recognition of its neuroendocrine features later led to the hypothesis that it arose from Merkel cells in the skin, although recent evidence revisits the question of an epithelial origin. We present a case of MCC arising on the temple of a 78-year-old male, in association with an actinic keratosis. Three years later, a local tumor recurrence showed a mixed malignancy comprising small cell neuroendocrine and large cell squamoid components. A further recurrence at the site two years later, after local radiotherapy, revealed a bizarre pleomorphic large cell morphology with retention of immunohistochemical features of a neuroendocrine carcinoma. Evolution to a bizarre pleomorphic large cell neoplasm has been recorded in malignant tumors treated by radiotherapy, but is unique for MCC. The association of this MCC with an actinic keratosis and the development of squamoid differentiation in a local recurrence support the link between MCC and epithelial neoplasia. In addition, its evolution to an atypical fibroxanthoma-like morphology is of interest, because some view atypical fibroxanthomas as bizarre variants of squamous cell carcinoma.