Epithelial marker expression and/or epithelial differentiation, as well as "anomalous" expression of keratins, are features of some soft tissue tumors. Recently, we have encountered an unusual mesenchymal tumor composed of bland, distinctly eosinophilic, keratin-positive epithelial cells, which were almost entirely obscured by xanthogranulomatous inflammation. Six cases were identified (5 F, 1 M; 16-62 years (median 21 years)) arising in soft tissue (n = 4) and bone (n = 2) and ranging in size from 2 to 7 cm. The tumors were generally circumscribed, with a fibrous capsule containing lymphoid aggregates, and consisted in large part of a sheet-like proliferation of foamy histiocytes, Touton-type and osteoclast-type giant cells, and chronic inflammatory cells. Closer inspection, however, disclosed a distinct population of uniform, cytologically bland mononuclear cells with brightly eosinophilic cytoplasm arranged singly and in small nests and cords. Overt squamous and/or glandular differentiation was absent. By immunohistochemistry, these cells were diffusely positive with the OSCAR and AE1/AE3 keratin antibodies, and focally positive for high-molecular weight keratins; endothelial and myoid markers were negative and SMARCB1 was retained. RNA-seq identified a PLEKHM1 variant of undetermined significance in one case, likely related to this patient's underlying osteopetrosis. Follow-up to date has been benign. In summary, we have identified a novel tumor of soft tissue and bone with a predilection for young females, provisionally termed "xanthogranulomatous epithelial tumor". These unusual lesions do not appear to arise from adnexa, or represent known keratin-positive soft tissue tumors, and the origin of their constituent epithelial cells is obscure. The natural history of this distinctive lesion appears indolent, although study of additional cases and longer term follow-up are needed.