Sebaceous carcinoma of the eyelid is commonly misdiagnosed because it simulates other entities both clinically and pathologically. In a review of all pathologic material removed from the eyelids of patients at the Mayo Clinic between 1905 and 1981, 43 sebaceous carcinomas were discovered. The tumors manifested most frequently on the upper eyelid; the onset of symptoms occurred in 31 women and 12 men at a mean age of 61.5 years (range, 28-82 years). Of the 43 patients, 11 had an associated second malignant tumor or exposure to irradiation. The microscopic diagnosis was based on finding a proliferation of basophilic neoplastic cells with foamy cytoplasm and a positive fat stain. Intraepithelial neoplasia in the form of pagetoid change or carcinoma in situ was found in more than 80% of cases. Histologically, the tumor tended to be moderately differentiated. A high degree of infiltration was frequently observed cases with metastases. When intraepithelial neoplasia is observed microscopically, we recommend a fat stain on a frozen section and a full-thickness eyelid biopsy to exclude sebaceous carcinoma.