Thirty-six patients underwent arthroscopic cystectomy and partial meniscectomy for a lateral meniscal cyst. In two other patients, an open cystectomy was performed following a diagnostic arthroscopy. The patients were reviewed at an average of 39 months (range 8-82) after the operation, and recurrence was found in four cases. Five patients, all keen sportsmen, were dissatisfied with the operation. Four patients, with arthroscopic signs of early degenerative arthritis, were still experiencing some pain, but were able to lead a normal working and social life. Arthroscopy is safe, giving low morbidity and recurrence. In the cases treated by arthroscopy, a horizontal meniscal tear was always found. The question whether this tear and the resulting meniscal changes are traumatic or degenerative in origin still remains; and, to some extent, neither hypothesis can be readily discarded. This study supports the use of arthroscopy alone in the treatment of lateral meniscal cysts.