Urethral atresia and alveolar capillary dysplasia (ACD) are rare congenital malformations. Urethral atresia is associated with severe pulmonary hypoplasia secondary to oligohydramnios. ACD is associated with pulmonary venous misalignment, results in severe pulmonary hypertension, and is uniformly fatal. We present a case of urethral atresia with successful, early placement of vesicoamniotic shunting, with resolution of the oligohydramnios, in which the neonate rapidly progressed to respiratory failure and death. Postmortem examination confirmed urethral atresia and diagnosed ACD. Given the surprisingly high mortality rate after vesicoamniotic shunting in patients with urethral atresia, we question whether there might be a possible link to ACD.