Surgery for congenital and early childhood lung cysts is often dictated by symptoms such as respiratory distress, infection or pneumothorax. Asymptomatic cysts present a therapeutic dilemma: surgical intervention and “conservative” observation have advocates. The risk of malignancy in such cysts is considered by some an indication for surgical intervention and is reviewed in this paper. Pleuropulmonary blastoma (PPB) is the most frequent malignancy associated with childhood lung cysts. Although rare, PPB occurs predictably in certain clinical and familial situations. This unique biology of PPB can inform the cyst management decision. The earliest manifestation of PPB is a malignant lung cyst in young children, clinically and radiographically indistinguishable from benign congenital lung cysts. Histopathologic examination differentiates cystic PPB from the benign cystic variants. Surgical excision of cystic PPB (with or without chemotherapy) cures approximately 85–90% of children. If not excised, cystic PPB evolves to cystic/solid or solid high-grade sarcoma (cure rate 45–60%) by age 2–6 years. Numerous reports of “malignancy in a congenital lung cyst” are now understood as the characteristic progression of cystic PPB. PPB is genetically determined in many cases. Detailed family history may reveal the hallmarks of PPB in the patient or young relatives: a unique constellation of diseases including lung cysts, cystic nephroma, childhood cancers, stromal sex-chord ovarian tumors, seminomas or dysgerminomas, intestinal polyps, thyroid hyperplasias, and hamartomas. Pneumothorax and multifocal/bilateral lung cysts also characterize PPB. These diagnoses predict that a lung cyst is more likely PPB than a benign congenital cyst. Patients fitting this pattern deserve histologic diagnosis. The genetic basis for this heritable syndrome is unknown but is being actively investigated. Pediatr Pulmonol. 2009; 44:14–30. © 2008 Wiley-Liss, Inc.