Pseudocyst formation is a well-known complication of pancreatitis. Pseudocysts of the pancreas are localized collections of fluid occurring within the pancreatic mass or the peripancreatic spaces often following acute pancreatitis or in a patient with chronic pancreatitis without any previous history of an acute episode. The pathogenesis depends on the etiology: in acute pancreatitis, enzyme-rich fluid and products of autodegradation accumulate; in chronic pancreatitis, the cyst results from an obstructed duct. The natural history of the diseases has become clearer with the advent of ultrasound and computed tomographic scanning. The incidence of pseudocysts is noted to be higher as a result of better diagnostic techniques. Pseudocysts must be suspected in patients who have persistent abdominal pain or consistently elevated levels of pancreatic enzymes. Nearly one third of pancreatic pseudocysts resolve spontaneously. Some, however, require intervention. Surgery was the only option available for many years. Recently, newer methods, such as percutaneous drainage and endoscopic cystenterostomy, have been used. Percutaneous drainage is inexpensive, has a low complication rate, and is done under local anesthesia. The recurrence rate is high with a one-time needle aspiration; this rate can be reduced to less than 10% by using an indwelling catheter. On the basis of a review of literature and our own experience, we believe that percutaneous continuous catheter drainage should be the first choice in the management of pseudocysts that require intervention. Experience with the endoscopic technique is increasing, and it may prove to be a viable alternative in skilled hands in the future.