Subcutaneous swelling is one of the common cases seen in surgical practice. The pathology of the subcutaneous swellings is varied ranging from epidermal inclusion cyst to malignant swelling. Fungal infections producing subcutaneous swelling are relatively rare. They occur in immunocompromised patients. We report a case of phaeohyphomycosis (PHM) which is characterized by the presence of pseudohyphae, hyphae, brown yeast-like cells, and melanin in their cell walls, presenting as subcutaneous swelling. A 34-year-old male presented with a swelling over the anterior aspect of left knee joint for three months, which was initially painless. He gave a history of purulent discharge from the swelling 20 days back. He was a known case of myasthenia gravis on regular treatment with steroids. On examination, the swelling was firm, nontender, and mobile in subcutaneous plane. The skin over the swelling showed a healed puckered scar, fine needle aspiration cytology (FNAC) of the swelling showed slender, septate hyphae with variable branching bulbous ends, and few of the hyphae showed pigmentation morphologically suggestive of PHM. The swelling was excised with clear margin. Subcutaneous mycosis is common in tropical and subtropical countries like India. Strong suspicion of this diagnosis is warranted especially in immunocompromised patients. Surgical excision is the treatment of choice to achieve early cure.