Palisaded encapsulated neuroma (PEN) is a rare intraneural neuroma. It usually occurs as a solitary asymptomatic skin-colored papule, and commonly affects the butterfly area of the face of middle-aged adults. We report a case of PEN which developed on the right upper eyelid of a 30-year-old man. It was a 3 mm-sized skin colored papule, and histologically, there was a well- defined encapsulated nodule in the dermis, composed of spindle cells with basophilic and plump nuclei in a palisading pattern. On immunohistochemical staining, the tumor cells of the nodule were positive for S-100 protein, while the capsule of the nodule was positive for epithelial membrane antigen.