Peripheral ameloblastoma is an extremely rare odontogenic soft tissue tumor with histologic characteristics similar to those of the intraosseous ameloblastoma. It appears in the gingiva and oral mucosa. And it usually does not show any bone involvement on radiographs, except for saucer shaped erosion of underlying alveolar bone. Recurrence is considered uncommon. We report a case of peripheral ameloblastoma with bone involvement. Histologically it presented with follicles and nest of tumor cells with palisading pattern. And radiographs showed the typical saucer shaped alveolar bone erosion at the distal area of right mandibular third molar. At 6-month follow-up after operation, no local recurrence was noted.