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Plexiform fibrohistiocytic tumor is an uncommon mesenchymal tumor that can cause difficulty in diagnosis and surgical management. On clinical and histologic examination, these tumors can potentially be misdiagnosed as sebaceous/epidermal cysts. We report a case of plexiform fibrohistiocytic tumor in a young female, which on initial clinical evaluation was diagnosed as sebaceous cyst. The tumor was deeply invasive, with positive margins on two excisional biopsy specimens. The importance of recognition of this entity, potential pitfalls and prognosis are discussed and the literature is reviewed.