A biopsy-proven diagnosis of carcinoma in situ of the palpebral conjunctiva should always evoke doubt. This change may represent pagetoid spread of an occult sebaceous gland carcinoma. The conjunctival changes may be subtle, preceding the formation of any obvious mass in the eyelid. In this situation, full-thickness eyelid biopsy should be considered as a possible alternative to diagnosis accurately the disease process. The authors present two cases where biopsy of chronically inflamed palpebral conjunctiva was at first diagnosed as carcinoma in situ. Full-thickness eyelid biopsy was performed at varying times following the conjunctival biopsy. Sebaceous gland carcinoma was then diagnosed in each case. The pathogenicity of carcinoma in situ differs markedly from sebaceous gland carcinoma. A palpebral conjunctival biopsy diagnosed as carcinoma in situ should arouse suspicion that a more serious pathologic process may be present. Full-thickness eyelid biopsy may be appropriate under such circumstances.