I've seen mostly Magic (blue) quality items on merchants. Occasionally, I see a Rare (yellow) item. The rare items tend to appear about as often as they drop out in the world, at least from my experience.
That's got me wondering: Is it possible for a merchant to have a legendary item in his shop?
Best Answer
Currently, the answer appears to be no - if such a thing is possible, it's so extraordinarily rare that thus far nobody has encountered it and lived to tell the tale. However, it is possible to craft legendaries using plans found in Inferno - an expensive proposition, but as close to a vendored legendary as you'll likely be able to find.