We present a rare case of clonal seborrheic keratosis (SK) with focal Bowen disease (BD) (squamous cell carcinoma in situ) accompanied by sebaceous differentiation. An 89‐year‐old woman presented with a pale reddish‐brown plaque on the left buttock. Histopathological examination of the excisional specimen revealed hyperkeratosis, acanthosis, and intraepidermal epithelioma. In some areas of the tumor, we observed proliferation of basaloid keratinocytes within the intraepidermal nests and pseudohorn cysts. This area was diagnosed as clonal SK. However, in other areas, the tumor cells within the intraepidermal nests showed nuclear pleomorphism, abnormal mitoses, dyskeratotic cells, and clumping cells, consistent with BD with a nested/clonal pattern (clonal BD). The SK and BD areas were contiguous with the transitional zone. Some nests within the BD area contained vacuolated cells with bubbly cytoplasm and scalloped nuclei, suggestive of sebaceous differentiation. Therefore, we made the diagnosis of clonal BD with sebaceous differentiation arising from clonal SK. All areas contained intraepidermal nests, which revealed that the lesions were not the result of accidental collision, but that the neoplastic cells in the intraepidermal nests of the SK transformed into BD and underwent sebaceous differentiation.