Topographic study of congenital cholesteatomas revealed that the majority of these congenital epidermal cysts occur near the tympanic isthmus of the middle ear. Since this is the junction of the first and second brachial arch, the origin of the cholesteatoma could be linked to the migration of the external canal ectoderm into the middle ear at the early stage of development. Embryologic study showed that the tympanic ring plays an important role in limiting the medial extent of the external canal to the level of the tympanic annulus. Migration of the ectodermal tissue into the middle ear beyond the annulus is likely to be caused by the failure of this inhibitory function of the tympanic ring. Microscopic sections of human fetuses were studied to determine the developmental relationships between the external canal ectoderm and the tympanic ring. A section from a 161/2-week fetus showed significant papillary ectodermal tissue projection into the mesenchyme near the tympanic isthmus, while the tympanic ring was absent in that site. Anatomical distance between the tympanic ring and the internal auditory canal is extremely short in these fetuses. This is suggestive of the source of petrous cholesteatomas from the canal ectodermal migration. These observations form the basis of the author's theory that the pathogenesis of congenital cholesteatomas is caused by migration of external canal tissue into the tympanic isthmus or into the petrous bone as a result of developmental error in which the advancing external canal ectoderm failed to receive stop signal of the tympanic ring that contains the ectoderm at the annular plane.