We examined two cases of proliferating pilar cysts of the inguinal region. One of the cases showed a transformation to epidermoid carcinoma and, despite surgical resection, the patient died by means of distant generalized metastases. The diagnosis of proliferating pilar cyst should be made in pilar cysts with epithelial proliferation that shows well-defined borders and abundant keratinization despite cytologic atypia and mitotic activity. The diagnosis of carcinoma in proliferating pilar cysts should be reserved for lesions showing poorly defined borders and clear-cut infiltrative properties with cytologic evidence of malignancy.