Merkel cell carcinoma is a rare aggressive primary cutaneous neuroendocrine tumor. It is associated mostly with malignant skin lesions. Rare cases in the literature described its association with benign skin adnexal lesions. We present here an additional case of Merkel cell carcinoma arising from an epidermal cyst located in the left arm of a 57-year-old male. The tumor was composed of lobules of monotonous round cells with dusty chromatin. It was positive for cytokeratin 20 and neuroendocrine markers. Patient was treated with surgical resection and radiation to the axilla. He is well and free of disease after 5 years of follow-up.