Lichen planus (LP) is a chronic inflammatory dermatosis with a prevalence of 0.1%-4%, typically affecting individuals aged 30-60 years. Isolated lip involvement is uncommon, seen in 0.51%-8.9% of cases, predominantly in middle-aged men. We report a 58-year-old male with well-controlled diabetes who developed isolated lower lip LP, initially misdiagnosed as herpes simplex virus infection and unresponsive to oral acyclovir. Dermoscopy and histopathology confirmed the diagnosis. The patient was managed with a novel regimen: Tacrolimus 0.1% ointment (morning) and tretinoin 0.025% cream (night), alongside sunscreen and petroleum jelly. After 4 weeks, marked improvement was observed with flattened lesions and reduced pruritus. This case underscores the potential efficacy of combining a calcineurin inhibitor and a retinoid as a corticosteroid-sparing alternative for localized LP. Clinically, this approach offers a valuable treatment option for patients with lip LP showing suboptimal response to initial corticosteroid therapy, minimizing steroid-related adverse effects and improving therapeutic outcomes.