The dorsal cyst is poorly understood, although it is commonly encountered in holoprosencephaly. We endeavor to establish the role of diencephalic malformations in the formation of the dorsal cyst and speculate on the developmental factors responsible. We reviewed the imaging of 70 patients with holoprosencephaly (MRI of 50 and high-quality CT of 20). The presence or absence of a dorsal cyst, thalamic noncleavage and abnormal thalamic orientation were assessed for statistical association, using Fisher's Exact Test and logistical regression. The presence of a dorsal cyst correlated strongly with the presence of noncleavage of the thalamus (P = 0.0007) and with its degree (P < 0.00005). There was a trend toward an association between abnormalities in the orientation of the thalamus and the dorsal cyst, but this was not statistically significant (P = 0.07). We speculate that the unseparated thalamus physically blocks egress of cerebrospinal fluid from the third ventricle, resulting in expansion of the posterodorsal portion of the ventricle to form the cyst.