The authors present the case of a woman with a cerebellopontine angle (CPA) epidermoid cyst that degenerated into a squamous cell carcinoma. Malignant degeneration of an epidermoid cyst is an extremely rare occurrence. Malignant transformation must be considered in the differential diagnosis when new contrast enhancement on imaging studies and progressive neurological deficit are seen in a patient harboring an epidermoid cyst. The patient initially presented with a 10-year history of left trigeminal neuralgia, subacute left-sided hearing loss, and with facial weakness of 3 weeks' duration. Initial magnetic resonance (MR) imaging revealed a left CPA mass, consistent with an epidermoid. There was faint contrast enhancement where the tumor was in contact with the lateral brainstem. A subtotal resection was performed. Histopathological findings were consistent with an epidermoid tumor. One year after initial presentation, the patient's neurological deficit had increased, and follow-up MR imaging demonstrated a large contrast-enhancing tumor filling the left CPA and compressing the brainstem. At repeated surgery a squamous cell carcinoma arising from the previous epidermoid was found. The patient was subsequently treated with external-beam radiotherapy and stereotactic radiosurgery. Her tumor stabilized. Three years and 8 months after the patient's initial presentation, a new area of tumor developed at the torcular Herophili. The patient died shortly thereafter. Malignant squamous degeneration is a rare cause of enhancement on MR images, as is progressive neurological deficit in a patient with an epidermoid. The combination of subtotal resection, external-beam radiotherapy, and stereotactic radiosurgery may be useful for local tumor control but the long-term prognosis is guarded.