'Cholesteatoma' of the orbit is a variant of pseudotumor histologically characterized by masses of cholesterol crystals. We propose the term "epidermoid or true cholesteatoma" for lesions containing epithelial elements and refer to those nonepithelium-containing pseudotumors as "cholesterol granulomas." Important clinical features distinguish between epidermoid cholesteatomas and cholesterol granulomas of the orbit and justify a separation of these two pathologic entities.