Fibro-osseous pseudotumor of the digit is rare benign lesion of subcutaneous tissue which is thought to be reactive process as a result of repeated trauma. We report a case of an ulcerated lesion of skin of middle finger, clinically thought to be leishmaniasis which after punch biopsy followed by excision turned out to be fibrosseous pseudotumor. Diagnosis of fibro-osseous pseudotumor requires immense precision as it can clinically mimic unungal exostosis and can sometimes be misinterpreted clinically and radiologically as myositis ossificans. We suggested an algorithimic approach for histopathologic assessment of fibro-osseous soft tissue lesions with evaluation of both stromal and osseous components. Bland fibroblastic stroma, mature osseous component with prominent osteoblastic rimming and absence of zonation pattern will support the diagnosis of fibro-osseous pseudotumor especially if located at a superficial and distal location.