The keratinous cysts, occurring predominantly on the scalp in man, wherein keratinization occurs in the absence of keratohyaline granules are derived from the piliary apparatus. Therefore, it is proposed they be called pilar cysts in contrast to the more generally distributed epidermal cyst wherein keratinization occurs with keratohyaline granules. Histological, histochemical, and ultrastructural observations on each type of cyst are presented.