This report describes a case of odontogenic cyst with keratinization and dysplastic change of lining epithelium, which showed the manifestation of inflammatory radicular cyst, clinically. A 28-year-old man complained of dull pain in the right mandibular molar region. Radiographically a well-defined oval cystic lesion with non-vital teeth, a common finding in radicular cyst, was observed. Microscopically, the lining epithelium of the cyst demonstrated both keratinization and severe epithelial dysplasia. Atypical findings such as hyperchromatic nuclei, increase of N/C ratio and drop shaped rege ridge were observed in the lining epithelium. However, definite invasion into fibrous connective tissue was not found. Immunohistochemically, the dysplastic lining epithelium was highly positive for proliferative marker, Ki-67. Based on the dysplastic changes of lining epithelium, this periapical lesion would be considered to be signs of malignant change. From this case, we conclude that definitive diagnosis by microscopical examination should be made, even if the periapical lesion would be clinically considered as inflammatory radicular cyst.