A 22-year-old female with morphea-like lesions, deep subcutaneous nodules and lipoatrophic areas of the skin on lateral aspects of the upper arms, on the breasts and on the buttocks is described. In 1990 a biopsy specimen obtained from a subcutaneous nodule showed hyaline necrosis of fat tissue; there were no epidermal changes. Direct immunofluorescence revealed granular deposits of IgM at the dermo-epidermal junction of the skin overlying the subcutaneous nodule. In a biopsy specimen taken at the onset of the disease in 1988, hyaline sclerosis of the deep dermis, follicular hyperkeratosis and vacuolar degeneration in the epidermis were described. There was weak positivity for antinuclear antibodies. The diagnosis of lupus erythematosus panniculitis (LEP) was made. Administration of chloroquine resulted in complete clearing of nodules in 3 months. The reported case demonstrates the difficulties in establishing the diagnosis of LEP in patients who present with subcutaneous disease, morphea-like lesions and who do not have other clinical or laboratory evidence of lupus erythematosus. The differential diagnosis of LEP and deep morphea is discussed.