BACKGROUND: Topical squaric acid dibutylester and diphenylcyclopropenone are still the most effective therapy for alopecia areata among widely available treatment options. Hence, it is important to know which one is more effective and safer between the two. AIMS: The aim of this study was to compare topical squaric acid dibutylester and diphenylcyclopropenone for the treatment of alopecia areata in terms of their efficacy and side effects. SUBJECTS AND METHODS: In the time period of January-March 2015, a total of 40 patients were selected for this study from the outpatient department of Rajendra Institute of Medical Sciences, Ranchi. After dropout of 16 patients, the remaining 24 patients were randomly divided into two groups; that is, group A for squaric acid dibutylester and group B for diphenylcyclopropenone. Each group received treatment for 6 months between March-November 2015. Their efficacy and side effects were compared. STATISTICAL TEST: Unpaired student t-test was performed. P < 0.05 was considered to be significant and 95% confidence interval was also used to evaluate the efficacy. RESULTS: The mean values of percentage change in baseline severity of alopecia tool score for squaric acid dibutylester and diphenylcyclopropenone were 52.25 and 34.45, respectively. At 6 months, 95% confidence interval was 43.5-61% for group A and 25-44% for group B. In 58.33% of group A patients, A3 (50-74%) grade of improvement was observed, whereas in group B patients, it was 33.33%. A4 grade of improvement (75-99%) was also seen in 1 patient of group A. Minor side effects were seen in 2 patients of group A and 10 patients of group B. None of the group A patients showed major side effects, however, 2 patients suffered major side effects in group B. CONCLUSIONS: Between squaric acid dibutylester and diphenylcyclopropenone, squaric acid dibutylester is more efficacious. Further, frequencies of major and minor side effects are also lower than diphenylcyclopropenone.