Background: A femoral head “divot” is a rare finding during hip arthroscopy. A linear chondral indentation can be observed on the femoral head, just lateral and parallel to the acetabular labrum. Purpose/Hypothesis: The purpose of this study was to describe a novel arthroscopic sign and retrospectively review patients with this finding. We hypothesized that this sign would be found in patients with characteristics consistent with hip microinstability. Study Design: Case series; Level of evidence, 4. Methods: Intraoperative images of patients undergoing primary hip arthroscopy between July 2017 and July 2019 were reviewed for evidence of a femoral head divot. Preoperative characteristics, physical examination findings, radiographic measurements, and magnetic resonance imaging (MRI) findings were described. Results: Of 690 available cases, 14 cases (13 patients; 2.0%) had evidence of a femoral head divot. The mean patient age was 29.1 years, and all but 1 patient (92.3%) were female. Ligamentous laxity was present in 81.8% of patients, anterior apprehension test was positive in 78.6%, and painful internal snapping was present in 50.0%. The mean lateral center-edge angle, anterior center-edge angle, and Tönnis angle were 19.2°, 20.3°, and 12.4°, respectively. The divot was identified in 5 of 12 available MRI scans, most commonly on axial proton density sequence. Intraoperatively, all hips had labral tears, iliopsoas bursitis was demonstrated in 78.6%, and the ligamentum teres was damaged in 42.9%. Labral repair was performed in 12 of the 14 hips, with 2 patients undergoing labral reconstruction. Iliopsoas fractional lengthening was performed in 50.0%, capsular plication was performed in 78.6%, and capsular repair was performed in the remainder. Conclusion: The femoral head divot sign is a rare arthroscopic finding during hip arthroscopy. The results of this study demonstrated that patients who have a divot also present with characteristic radiographic or physical examination findings of hip microinstability due to either acetabular dysplasia or ligamentous laxity. Recognition of a femoral head divot may be valuable for the diagnosis of microinstability during hip arthroscopy and may help guide appropriate management, such as capsular plication. Further studies are needed to determine the exact prevalence of the femoral head divot in patients with microinstability and to evaluate the effect of this finding on patient outcomes.