Xanthogranulomatous inflammation is a rare pathological condition most frequently detected in the kidney and gallbladder. Reported herein is a case of xanthogranulomatous inflammation in a 51-year-old male presenting as a mass-forming lesion in the terminal ileum with mucosal ulceration. Diagnostic laparoscopy followed by ileocecectomy was performed due to intra-operative suspicion of carcinoma of appendix. This is a report of the condition involving the terminal ileum with mucosal ulceration and full-thickness involvement of bowel wall which are uncommon features of xanthogranulomatous inflammation in previously reported lower gastro-intestinal tract lesions.