Recent advances in our understanding of the function of the hip capsule have clarified its importance to normal hip function and kinematics. The iliofemoral ligament is the primary stabilizing structure for controlling anterior translation and external rotation of the hip, and is violated by the arthroscopic interportal capsulotomy. Microinstability of the hip occurring after surgical trauma remains a poorly defined clinical entity. In certain at-risk populations, capsular repair should be considered as part of an arthroscopic hip procedure to achieve optimal outcomes and avoid iatrogenic instability (dislocation or microinstability). Despite a lack of conclusive evidence-based indications, we recommend capsular repair in the settings of borderline hip dysplasia (or dysplastic variants such as increased femoral anteversion), hip hypermobility, connective tissue disorders, and traumatic or atraumatic instability. With careful attention to arthroscopic capsular management, adequate exposure can be achieved and reproducibly allow for an effective capsular repair when indicated.