Prenatal detection and serial sonographic study of fetuses with congenital cystic adenomatoid malformation (CCAM) now makes it possible to define the natural history of this lesion, determine the pathophysiologic features that affect clinical outcome, and formulate management based on prognosis. In a series of 22 prenatally diagnosed cases, the overall prognosis depended on the effects of the lung mass and the consequent physiologic derangement: A large mass may cause mediastinal shift, hypoplasia of normal lung tissue, polyhydramnios, and cardiovascular compromise leading to fetal hydrops. Two types of CCAM were distinguished by gross anatomy, ultrasonographic findings, and prognosis. Microcystic lesions (cysts < 5 mm; solid appearance) are often associated with fetal hydrops and have a poor prognosis. Macrocystic lesions (single or multiple cysts > 5 mm) are not usually associated with hydrops and have a more favorable prognosis. Four initially large lesions partially disappeared on serial prenatal sonography, suggesting that improvement can occasionally occur during fetal life. The finding that fetuses with hydrops are at high risk for fetal or neonatal demise led to fetal surgical resection of the massively enlarged pulmonary lobe (fetal lobectomy) in two cases. Fetuses with CCAM but without hydrops have a good chance for survival with maternal transport, planned delivery, and immediate neonatal resuscitation and surgery.