The use of a pneumatic tourniquet in total knee arthroplasty has been linked to complications caused by local tissue hypoxia. Fat necrosis is a rare condition that presents as an ill-defined subcutaneous lesion. The clinical features resemble that of a lipoma but histological appearance is characteristic. Ultrasound imaging is helpful in establishing the diagnosis both by sonographic appearance as well as in directing a biopsy if necessary. We present a case of encapsulated fat necrosis caused by the use of a pneumatic tourniquet during total knee arthroplasty.