A congenital cystic adenomatoid malformation (CCAM) is a congenital lung lesion that, when associated with hydrops, is thought to have a dismal prognosis without fetal intervention. The authors report a case of a fetus with a CCAM associated with ascites as the only manifestation of hydrops, which was diagnosed at 19 weeks gestation. The CCAM regressed without intervention between 23 and 29 weeks of gestation with resolution of the ascites. The baby was born asymptomatic at term, and the infant underwent elective resection of the CCAM at 1 year of age. A review of the literature from 1980 to 2000 yielded 9 other cases of spontaneous resolution of hydrops associated with CCAM, suggesting that although rare, this outcome is a possibility in fetuses diagnosed with the condition. Because most fetuses diagnosed with hydrops undergo termination of pregnancy, the true incidence of hydrops resolution is potentially higher than predicted. This has important implications for prenatal counseling particularly in centers in which fetal intervention is not available.