Parosteal lipoma is an extremely rare benign tumor that is composed mainly of mature adipose tissue and has an intimate relationship to the underlying periosteal bone. We present a case of parosteal lipoma of humerus combined with hyperostosis. Standard radiography demonstrated a radiolucent mass surrounding an exostosis. CT showed a fat density, lobulated mass surrounding the larger osseous excrescence and cortex. The patient underwent surgery. Intraoperative examination found a well encapsulated, homogenous, yellowish, fatty tissue attached by a stalk to the underlying bone. The pathology specimen showed mature adipose tissue consistent with the intraoperative finding.