Diagnosis of alopecia areata (AA) can be challenging when clinical presentation is not classical. One of the earliest and most important histopathological feature which we expect to see is the peribulbar lymphocytic infiltrate however it may not be appreciable in many cases. To demonstrate the utility of CD3 immunohistochemistry in diagnosis of alopecia areata. A 3mm punch biopsy from margin of alopecic patch was done in 87 patients with clinically diagnosed alopecia areata. The gross biopsy specimens were then cut to remove excess fat of subcutaneous tissue till the hair bulbs were visible. The biopsy was then processed to get a horizontal section at the level of bulb and stained with Hematoxilin and Eosin ( H & E ) and CD3 immunohistochemistry was performed. Sections obtained were examined by two blinded observers for presence of appreciable peribulbar infiltrate. Association was found out between histopathology with Hematoxilin and Eosin and CD3 immunohistochemistry by using appropriate statistical test. Out of 87 patients 25 had diffuse type of AA and 62 had patchy type. Out of 62 cases of patchy AA 22 were CD3+ and among these CD3+ cases 14 (63.6%) did not show appreciable peribulbar infiltrate on H & E. This difference was statistically significant with p value < 0.05. Among all 25 cases of clinically suspected diffuse alopecia areata , 5 (20%) were CD3 positive and none showed appreciable peribulbar infiltrate on H & E. Out of total 87 patients enrolled in the study 19 patients that is 70.4% patients which were CD3+ failed to show appreciable infiltrate on H & E. This difference was statistically significant with p value < 0.05. This study demonstrates that in 54 out of total 87 patients (87.1%) of clinically diagnosed alopecia areata, peribulbar infiltrate was not apparent in routine H & E staining. Around 70% of cases showed CD3 positivity but failed to show appreciable infiltrate on H & E. Immunohistochemistry has an edge over H & E staining in detection of lymphocytic infiltrate in AA.