Localized Pigmented Villonodular Synovitis (LPVS) is a lesion that may affect any joint but is frequently found in the knee. Detection and diagnosis of this entity are clinically difficult, and plain roentgenograms are usually within normal limits. We present a case report of a LPVS localized at the posterior compartment of the knee that mimics a meniscal lesion. Magnetic resonance imaging (MRI) performed before the resection through an arthroscopic procedure helped to diagnose the tumor, which in this case had an infrequent location. MRI is a valuable clinical tool for the assessment of intraarticular tumors of the knee joint that otherwise may be misdiagnosed and treated as a meniscal tear.