Discoid lupus erythematosus (DLE) is an autoimmune disease commonly affecting sun-exposed areas of the skin. Subjects with DLE have high-levels of plasmacytoid dendritic cells -derived interferon-α, which mediates both loss of immune tolerance to self-antigens and exaggerated inflammatory state, and supports proliferation and differentiation of hyperactive B-cells. In a few cases, DLE of the lips, scalp, ears or nose may eventually progress to squamous cell carcinoma (SCC). Photosensitivity and the long-standing immune-mediated chronic inflammation and dysregulated healing characterized by atrophy, hypopigmentation or scarring inherent to DLE are risk factors for progression to SCC. We review some aspects of the pathogenesis of DLE and the possible roles of inflammation and photosensitivity in the carcinomatous transformation of DLE keratinocytes, and present an illustrative case of DLE of the lower lip in an HIV-tuberculosis co-infected black person, that progressed to SCC.