We report a case of squamous cell carcinoma of the penis that seemed to arise within a verruciform xanthoma of this organ. A lesion in the prepuce was initially diagnosed as a verruciform xanthoma histopathologically and was removed in part. Six years later, the patient exhibited a well-differentiated squamous cell carcinoma of the penis that contained many clusters of xanthoma cells in the stroma. Although the retrospective examination of biopsy specimens of the initial lesion in this patient showed the features mainly of verruciform xanthoma, significant architectural and cytological atypia was also present in the overlying epidermis. Thus, we must be careful not to overlook the presence of a squamous cell carcinoma arising within a benign reactive lesion such as a verruciform xanthoma.