Osteolysis, caused by active resorption of bone matrix by osteoclasts, can be primary or can develop secondary to a variety of disease processes. An elevated level of inflammatory cytokines in the local milieu and increased blood flow secondary to infection or autonomic neuropathy stimulate the osteoclasts and cause bone loss in the diabetic foot. Charcot's neuroarthropathy and osteomyelitis are well-known foot complications of diabetes, and secondary osteolysis has largely been underappreciated and, hence, underreported. Plain radiographs, an initial component in the evaluation of the diabetic foot, may not successfully differentiate secondary osteolysis from osteomyelitis. We describe a patient with phalangeal osteolysis secondary to soft-tissue infection in whom a correct and timely diagnosis helped avoid unnecessary surgical interventions.