A 7-day-old premature female infant presented with rapidly progressive, erythematous, annular skin lesions from the 5(th) day of life. She was diagnosed provisionally as a case of neonatal lupus erythematosus and was investigated accordingly. Histopathological examination of the skin biopsy specimen revealed presence of hyphae of dermatophytes in the stratum corneum, and the diagnosis was changed to tinea corporis. Differential diagnosis of the annular erythema of infancy has been discussed and the importance of scraping a scaly lesion for KOH preparation in the diagnostic work-up of such a patient has been highlighted.