Juvenile psammomatoid ossifying fibroma is a gradually progressive, aggressive extragnathic craniofacial tumor of bone. Due to its complex histogenesis, biological behavior, histology, and classification, its nomenclature has always been the focus of debate among pathologists. Based on the clinical behavior and histology, the term psammous desmo-osteoblastoma (PDO) is an apt expression for this lesion. Immunohistochemical investigation with anti-osteonectin shows positivity for spindle cells whereas psammoma bodies are negative. These results shore up the hypothesis of osteogenic differentiation of the undifferentiated mesenchymal cells of the periodontal ligament that may be responsible for the aggressive behavior of the lesion. Aneurysmal bone cysts (ABCs) are known to be secondarily associated with primary osseous neoplasms like ossifying fibroma, giant cell granuloma, etc. We report a rare case of PDO with concomitant ABC in the mandible of a 30-year-old male patient. The present lesion had recurred at the same site of an osteolytic lesion diagnosed 7 years ago as a benign fibro-osseous lesion and treated by conservative surgical curettage. The histological presentation substantiated by special stains and immunohistochemistry point to the diagnosis of psammous desmo-osteoblastoma with a concomitant ABC. Review of the literature revealed the presentation to be rare with very few cases reported till date.