<jats:p>Penile sclerosing granuloma is a foreign body reaction to the injection of material, usually for genital augmentation purposes. Patients commonly deny having had or performed these procedures on themselves, and diagnosis can be challenging. We describe the case of a 62-year-old man with a 10-year history of a growth on the penile shaft. Dermoscopic examination showed an orange background with shiny white structures, suggesting a granulomatous pathology. Guided biopsies confirmed a sclerosing lipogranuloma. The patient admitted to having self-injected motor oil. For the first time, we report the dermoscopic description of sclerosing granuloma, which will improve clinical diagnostic precision and guide biopsies. We also contribute the first description of a dermoscopic rainbow pattern in a granulomatous disorder; this could be due to a physical phenomenon called ‘dichroism’.</jats:p>