Chiari III malformations are extremely rare hindbrain malformations that are associated with a high early mortality rate, or severe neurologic deficits in the survivors. The preferred treatment is early operative closure and CSF shunting. We report a case of a newborn infant with a Chiari III malformation with displacement of the brainstem and cerebellum into the cervical encephalocele which precluded immediate operative closure of the defect. Instead, a ventriculoperitoneal shunt was placed and the patient was followed with serial imaging studies. The child survived. The shunt allowed the brainstem and cerebellum to regress into the cervical spinal canal as the dilated cerebral aqueduct and fourth ventricle decompressed. A delayed closure of the cervical encephalocele was performed at 30 months of age. Cerebrospinal fluid diversion with delayed closure may be an option for large lesions.