Melasma is an acquired chronic hyperpigmentation which mainly affects women on sun-exposed areas of the body, especially on the face in Fitzpatrick skin types III-V. The study setting is at the Dermatology Clinic at NILES, Cairo University, Egypt. This study aims to evaluate the clinical efficacy and safety of fractional ablative erbium:YAG Laser therapy versus chemical peeling in treatment of melasma. This study included 30 patients with melasma on their face aged 20-50 years. The patients were divided into two groups. In group I, 15 patients were treated by four sessions of fractional erbium YAG laser at 4 weeks interval. In group II, 15 patients were treated by four sessions of chemical peeling with glycolic acid 70%.The percentage of improvement in patients treated by fractional erbium YAG laser was 20 – 80% with amean 54.33 ± 18.01 and the percentage of improvement in patients treated by chemical peeling was 30 – 85 % with a mean 53.33 ± 18.09. So, there was no significant difference in the percentage of improvement in both groups (P- value = 0.881). It was observed that fractional erbium YAG is as effective as 70% glycolic acid peel in patients with melasma.