Chronic dacryocystitis is frequently caused by nasolacrimal duct obstruction or infection. Chronic stagnation of tears within the lacrimal sac leads to formation of mucocele which upon pyogenic infection turns into pyocele. Encysted lacrimal mucocele or pyocele presenting as a huge swelling causing distortion of surrounding structures is relatively uncommon. Very few cases were reported yet in the literature. Tumors originating from the lacrimal sac may mimic chronic inflammation and be misdiagnosed, delaying treatment. Here we report a case report of a 73 year old man with encysted lacrimal pyocele secondary to chronic dacryocystitis which was initially thought as malignancy due to the enormous swelling causing distortion.