Necrobiotic xanthogranuloma with paraproteinemia is a progressive and destructive process that is often confused both clinically and histologically with other granulomatous and xanthomatous entities. It was first described by Kossard and Winkelmann in 1980. Prior to this, the entity was reported under a variety of names such as atypical multicentric reticulohistiocytosis with paraproteinemia, atypical xanthoma disseminatum, and atypical necrobiosis lipoidica. A 69-year-old woman experienced slightly pruritic and painful papules, plaques, and nodules. Initial biopsy specimens showed a granulomatous process consistent with granuloma annulare. Later biopsy specimens demonstrated histologic changes indicative of necrobiosis lipoidica. The most recent histologic findings are those of necrobiotic xanthogranuloma, with results of laboratory studies revealing a coexistent IgG kappa paraproteinemia. Patients with necrobiotic xanthogranuloma who demonstrate a benign monoclonal proteinemia and are evaluated for several years show a 9 to 11 percent risk of myeloma, amyloidosis, or macroglobulinemia. Multiple treatment regimens have been attempted, none of which are curative. We propose that this entity may be part of an evolutionary process that may start as a granulomatous entity and culminate in a xanthogranulomatous process with an accompanying paraproteinemia.