The authors report a case of a three-year old boy, who presented with discharge from the site of a previously excised postaural lesion reported to have been an epidermoid cyst. It was found at operation that he had a fistulous connection between the site of the excised lesion and a congenital cholesteatoma sac in the mastoid bone. This case demonstrates the rare occurrence of congenital cholesteatoma eroding through the mastoid bone to the subcutaneous tissues and mimicking an epidermoid cyst. Such a presentation in a child has not previously been reported in the literature. The clinical, radiological, surgical and histological features of this case are discussed.