We present a case report of a classical presentation of palisaded encapsulated neuroma (PEN) of the skin occurring on the nasolabial crease and a review of the literature. A young woman presented with a smooth lobulated papule on the cheek enlarging over 2 years. Histologic examination revealed a well-circumscribed dermal nodule of small spindle cells with wavy nuclei arranged in fascicles, consistent with the diagnosis of PEN. PEN is a previously described, benign cutaneous neural tumour, with a histological appearance between that of a neurofibroma and a schwannoma. Though not uncommon, PEN remains under-diagnosed by many pathologists. Clinically, PEN is most commonly misdiagnosed as a basal cell carcinoma, a nevus, or as a neurofibroma.