We present a case of a subcutaneous encapsulated fat necrosis of the upper extremity that mimicked subcutaneous liposarcoma because of heterogeneous signal intensity, its relatively large size, and pronounced enhancement on magnetic resonance imaging (MRI). For this case, we present the radiologic findings including MRI, positron emission tomography-computed tomography (PET-CT), ultrasonography, and radiography. We emphasize the imaging features of this lesion, which has a fibrous capsule and briefly discuss its nomenclature and pathophysiology.