Dermoid cysts are developmental anomalies that represent the simplest form of teratoma. They are the result of the sequestration of the skin along the lines of embryonic closure. These cysts of the head and neck are uncommon and account for 7% of all dermoid cysts. They are predominantly found in the orbit, floor of mouth, and nose. As a dermoid cyst of the parotid gland is extremely rare, it is often misdiagnosed preoperatively. By way of imaging modalities such as computed tomography, MRI and ultrasongraphy along with FNAB, it can be differentiated from many other cystic lesions of the parotid gland. We report a case of dermoid cyst of the parotid gland which masqueraded as lipoma before complete surgical excision.