The diagnosis of panniculitis is a relatively rare occurrence for many practising pathologists. The smaller subset of lymphocyte-predominant panniculitis is further complicated by the diagnostic consideration of T cell lymphoma involving the subcutaneous tissue, mimicking inflammatory causes of panniculitis. Accurate classification of the panniculitis is crucial to direct clinical management as treatment options may vary from non-medical therapy to immunosuppressive agents to aggressive chemotherapy. Many diseases show significant overlap in clinical and histological features, making the process of determining a specific diagnosis very challenging. However, with an adequate biopsy including skin and deep subcutaneous tissue, a collaborative effort between clinician and pathologist can often lead to a specific diagnosis. This review provides an algorithmic approach to the diagnosis of lymphocyte-predominant panniculitis, including entities of septal-predominant pattern panniculitis (erythema nodosum, deep necrobiosis lipoidica, morphea profunda and sclerosing panniculitis) and lobular-predominant pattern panniculitis (lupus erythematous panniculitis/lupus profundus, subcutaneous panniculitis-like T cell lymphoma, cutaneous γ-δ T cell lymphoma, Borrelia infection and cold panniculitis).