An 83-year-old woman presented with acute weakness in her right hand and wrist extensors and swelling in the proximal right forearm. Nerve conduction studies confirmed compression of posterior introsseous nerve at the level of proximal forearm. MR imaging demonstrated the characteristics of lipoma which extended on the atero-lateral aspect of the right radius neck. The lesion was parosteal lipoma of the proximal radius causing paralysis of the posterior interosseous nerve without sensory deficit. In this case report, posterior inretosseous nerve palsy due to compression of a parostel lipoma was recovered after excision of the lipoma followed by intensive rehabilitation for six month. Surgical excision should be promptly performed to ensure optimal recovery from the nerve paralysis.