We studied the natural history and pathophysiology of congenital cystic adenomatoid malformation (CCAM) detected prenatally by ultrasound in twelve fetuses. Two types of fetal CCAM can be distinguished by gross anatomy, ultrasound findings, and prognosis. Microcystic lesions are usually associated with fetal hydrops and have a poor prognosis (five cases with one survivor). Antenatal diagnosis, maternal transport, and immediate thoracotomy after birth allowed the first reported survival of a newborn with a large microcystic CCAM. Macrocystic lesions are not usually associated with hydrops and have a favorable prognosis (five of seven survived). We conclude that fetuses with hydrops are at high risk for fetal or neonatal demise without intervention. Fetuses with CCAM but without hydrops have a good chance for survival with maternal transport, planned delivery, and immediate neonatal resuscitation and surgery.