Sebaceous glands are exocrine glands that constitute an integral part of the skin. Ectopic sebaceous glands commonly seen in the buccal mucosa and the lateral part of the vermillion border of the lips in the oral cavity are called fordyce granules and are observed in 80% of the population. Sebaceous elements in odontogenic cysts are relatively rare. Pluripotency of odontogenic epithelium explains the concurrent occurrence of sebaceous glands with odontogenic cystic lesions. A case report of orthokeratinized odontogenic cyst with sebaceous differentiation in a 24-year-old male patient is discussed in this article with emphasis on histogenesis, literature review and differential diagnosis.