Xanthogranulomatous inflammation of the urethra and the urinary bladder is a very rare pathological condition characterized by a chronic inflammatory infiltration composed mainly of foamy macrophages, with the presence of multinucleated giant cells. In a clinical examination, it can mimic urinary bladder carcinoma. This report presents the extremely rare case of a co-existing xanthogranulomatous urethritis and cystitis in a 64-year-old woman with recurrent dysuria, and with the suspicion of malignancy - as indicated on the basis of a cystoscopic examination. The standard treatment of this disorder is surgical resection, but in the presented case, only a diagnostic biopsy was performed. Because of the persistence of clinical symptoms, a cystoscopic examination and biopsy was repeated three times in a two year period. There was no malignancy seen in the repeated biopsies.