A 58-year-old woman presented with a cystic skin lesion. Microscopic examination showed an intradermal cyst lined by acanthotic squamous epithelium with squamous eddies and compact hyperkeratosis, and changes typical of verrucous lesions. Mature sebaceous cells and dendritic melanocytes were present as well. To our knowledge, this is the first report of a verrucous cyst with areas of sebaceous differentiation and melanocytes. Verrucous cysts are well-known, benign lesions with a clear histologic pattern. Histologically, they resemble verruca vulgaris with acanthosis, hypergranulosis, dense keratohyaline granules, and viral cytopathic effects seen. Until now, melanocytes and mature sebaceous cells in the cyst lining have not been reported. We do not feel that these findings alter the expected benign nature of this lesion. Instead, we report this case to suggest the possible adnexal embryonic origin, given the presence of sebaceous cells and dendritic melanocytes that support this histologic lineage in our specific case.