Sclerosing encapsulating peritonitis (SEP) is a rare cause of bowel obstruction, most commonly associated with chronic ambulatory peritoneal dialysis. It has not previously been reported as a complication of ventriculoperitoneal (VP) shunts. We describe the clinical features of shunt-associated SEP and the important management considerations. Two children presented with small bowel obstruction after long-standing VP shunting of hydrocephalus. Neither had a history of recent shunt infection/revision nor evidence of shunt malfunction. In each case, the bowel was "cocooned" in a fibrous sheath with a notable absence of parietal adhesions. Both children were managed by meticulous adhesiolysis accompanied by shunt exteriorization. Both had prolonged ileus and required total parenteral nutrition. One required further laparotomy at which adhesiolysis was accompanied by irrigation with icodextrin 4% and systemic high-dose methylprednisolone. Weaning of steroids was accompanied by the introduction of azathioprine. A notable feature of intestinal obstruction because of SEP was severe pain despite adequate decompression. The restrictive "cocoon" that envelops the bowel prevents bowel dilatation and accounts for atypical radiologic findings in these cases.