A master key lock includes a lock cylinder having a keyway for receiving a key, a sleeve about the cylinder, a plurality of wafer tumblers, a master key and a spring operable to axially move the sleeve relative to the cylinder when the master key is inserted into the keyway. A system that uses the master key lock includes a lock case wherein the sleeve is disposed between the cylinder and the lock case, the sleeve being axially movable within the case. The sleeve comprises a plurality of transversely disposed slots for engaging the plurality of wafer tumblers such that the lock is unlocked by insertion of a key or a master key. A method of using the master key lock is also disclosed.