A wide variety of cystic lesions may be encountered in the soft tissues and bones during routine MR imaging of the knee. These lesions represent encapsulated fluid collections and exhibit low signal intensity on T1-weighted images and high signal intensity on T2-weighted images because of their high content of free water. Many lesions produce clinical features suggestive of internal derangement of the knee, so correct MR diagnosis is needed to avoid unnecessary arthroscopy and to guide specific therapy. The purpose of this essay is to illustrate the MR appearance of cystic lesions that can be found around the knee and to explain the clinical features and significance of these lesions.