Cavernous haemangioma is a rare neoplasm that can be easily misdiagnosed as acoustic neuroma when it occurs in the internal auditory canal (IAC) or cerebello-pontine angle. A right cavernous haemangioma is reported in a 61-year-old male. The lesion was associated with non-pulsative tinnitus, deteriorating hearing loss and facial nerve dysfunction (House and Brackmann grade IV). A T1-weighted Gd-diethylenetriaminepentaacetic acid-enhanced MRI scan demonstrated a small hyperintense lesion confined to the right IAC. The tumor was completely resected via a retrosigmoidal approach. Histologic examination demonstrated a vascular tumor composed of an irregular, dilated vascular space with collagenous walls lined by a vascular endothelium. Facial nerve function remained unchanged and the patient remained well with no evidence of recurrence 2 years after surgery. We conclude that progressive hearing loss associated with facial nerve dysfunction, particularly when the lesion in the IAC is small, should raise the possibility of cavernous haemangioma.