Pigmented villonodular synovitis (PVNS) is a rare, benign, proliferative neoplastic condition affecting synovial-lined anatomic spaces. PVNS is characterized by hypertrophy of a synovial membrane by villous, nodular, and villonodular proliferation, with pigmentation secondary to hemosiderin deposition. The two forms of PVNS that have been described are diffuse (DPVNS) and localized (LPVNS). The knee is the most commonly involved anatomic location, followed by hip, ankle, shoulder, and elbow. Diagnosis of PVNS is not always obvious clinically. Various imaging modalities are often necessary to exclude other conditions and narrow the diagnosis. Magnetic resonance imaging has become the modality of choice for diagnosing PVNS. We present a case of intra-articular LPVNS with an extra-articular extension through the posterior capsule that has been successfully removed in an all-arthroscopic fashion.