Epithelial cysts in the subarachnoid space are infrequently reported and appear to be histogenetically heterogenous. This report describes the gross, immunohistochemical and ultrastructural findings of an asymptomatic isolated 3-cm epithelial cyst in the cerebellopontine angle. The cyst wall was composed of an inner glial layer with a luminal ependymal lining and an outer fibrous layer with no external lining cells. The lining ependymal cells had vacuoles, bleb-like protrusions, normal and abnormal cilia, and microvilli, the later were sometimes distended and detached into the lumen. They possessed neither pinocytic vesicles nor a basement membrane. The glial layer contained astrocytes, glial bundles and ependymal cells, often in pairs and forming intercellular lumina with cilia and microvilli. Some single and paired ependymal cells contained abnormal cilia and intracytoplasmic lumina. The blood vessels within the glial layer had elongated tight junctions and were fenestrated. The glial layer was demarcated from the outer fibrous layer by a continuous basement membrane. This cyst appears to have originated from a leptomeningeal neuroglial heterotopia and may represent a continued proliferative growth rather than degenerative change of the heterotopia.