Routine prenatal ultrasound revealed a unilocular cystic mass associated with upper thoracic hemivertebrae that grew to 6 cm at 28 weeks and was associated with hydrops. A thoraco-amniotic shunt decompressed the cyst and resolved the hydrops, but the shunt occluded 17 days later. Preterm labour led to vaginal delivery at 31 2/7 weeks. Postnatally, the cyst was decompressed by thoracentesis due to respiratory distress. It was resected on day four of life. Severe tracheobronchomalacia was present post-operatively, presumably due to prenatal mass effect of the cyst. At one year of age, the child has recovered completely without adverse respiratory or neurological sequelae.