Epidermal cysts represent the most common cutaneous cysts. They arise following a localized inflammation of the hair follicle and occasionally after the implantation of the epithelium, following a trauma or surgery. Conventional epidermal cysts are about 5 cm in diameter; however, rare reports of cysts more than 5 cm are reported in the literature and are referred as “Giant epidermal cysts.” Epidermal cysts although common, can mimic other common benign lesions in the head and neck area. A thorough clinico-pathologic investigation is needed to diagnose these cutaneous lesions as they differ in their biologic behavior, treatment, and prognosis. We report a case of a giant epidermoid cyst in the scalp area of a young female patient which mimicked lipoma on clinical, as well as cyotological examination. We also present a brief review of epidermal cysts, their histopathological differential diagnosis, and their malignant transformation.