Lipomembranous panniculitis is a peculiar type of fat necrosis and has been reported with several clinical conditions, commonly with peripheral vascular diseases. We are reporting a case of a 68-year-old woman with known liver cirrhosis and diabetes who presented with painful erythematous swelling of the right leg. Histological examination revealed microcystic changes within the subcutaneous fat. The microcysts were lined by acellular, eosinophilic membrane forming pseudopapillae and stained with periodic acid-Schiff stain. This histological feature is diagnostic of lipomembranous panniculitis. The pathologists should be aware of this entity because it aids the clinicians in investigating for associated clinical disorders.