Yolk sac tumor (endodermal sinus tumor) is rarely encountered in the temporal bone. Facial nerve paralysis can be a primary manifestation of this condition. Histologically, the tumor can be difficult to diagnose, although elevated levels of alpha fetoprotein can facilitate its identification. In this report, we describe the case of an 18-month-old girl who developed peripheral VIIth nerve palsy and a polypoid mass in the left external ear canal 3 months following myringotomy. Computed tomography and magnetic resonance imaging revealed that the tumor involved the left external ear canal, middle ear space, and mastoid air cells. Biopsies were consistent with a yolk sac tumor. Special staining demonstrated that only a very few tumor cells were positive for alpha fetoprotein, despite the markedly elevated level of alpha fetoprotein in her serum. The patient was treated with chemotherapy, which included cisplatin, etoposide, and bleomycin. Within a period of weeks, she experienced a complete reversal of her left VIIth nerve palsy, a marked decrease in her serum alpha fetoprotein levels, and a dramatic resolution of the tumor as demonstrated radiographically. Such a successful chemotherapeutic response in this case argues against surgical intervention in other cases, particularly in view of the risk of serious complications with surgery.