Background Localized scleroderma (morphea) is characterized by hardening and thickening of the dermis due to excessive collagen deposition. A decreased number of CD34+ cells and an increased number of Factor XIIIa+ cells are seen in the affected skin. The flashlamp pulsed dye laser (FLPDL) has been used in the treatment of localized morphea with promising results. Objective The purpose of this study was to evaluate the therapeutic effectiveness of the pulsed dye laser in localized scleroderma and to assess its effect on CD34+ cells, Factor XIIIa+ cells, and blood vessels. Study Design Thirty patients with plaque morphea were treated with a FLPDL (585 nm wavelength, 450 μs pulse duration). Fluence ranged from 7.5 to 8.5 J/cm2. Sessions were performed biweekly for a maximum of 6 months. Clinical, histopathologic, and immunohistochemical assessments were performed. Results Patients showed varying degrees of improvement of indurated skin. There was no worsening or further improvement at the treated sites during the follow-up assessments at 3, 6, and 12 months. An increased number of CD34+ cells were found in both the upper and the lower dermis, and a decreased number of Factor XIIIa+ cells were found in the lower dermis. Conclusion The FLPDL is effective in the treatment of morphea, as confirmed by the changes in the pathologic tissue and levels of CD34+ and Factor XIIIa+ cells.