Epithelial sheath neuroma is a rarely recognized but established entity in the medical literature. First described in 2000 by Requena et al, there have only been 7 published cases to date, mostly in female patients and presenting as symptomatic solitary lesions on the back without a known history of trauma. In 2006, Beer et al described and reviewed a dozen cases in which epithelial sheath neuroma-like features were seen in the advent of a surgical procedure, which was termed "re-excision perineural invasion" and attributed to possible eccrine duct implantation during surgery. Our case is a 66-year-old male patient who underwent an excision of a melanocytic neoplasm in which a reactive epithelial sheath neuroma was incidentally discovered in the excision specimen, adjacent to the biopsy site cicatrix. Histologically, there was benign cutaneous nerve hyperplasia with a proliferation of squamous epithelium in intimate apposition to the nerve bundles in the superficial dermis. We postulate that the process active in the formation of re-excision perineural invasion is the same as in epithelial sheath neuroma and that minor trauma not appreciable on histologic examination is responsible in the latter entity. We performed IL-6 staining and documented that IL-6 was upregulated at the interface of the nerve and reactive epithelium, but was absent in nerves distant from the site of surgery, suggesting that IL-6 may be essential to the lesion's development. The recognition of reactive epithelial sheath neuroma including the subcategory of re-excision perineural invasion is crucial for the dermatopathologist to prevent mislabeling this reactive entity as a perineural squamous cell carcinoma, which has clinical consequences for the patient such as wider re-excision and radiation treatment. Additionally, we have identified a potential pathophysiologic basis for this lesion.