We have treated 69 patients with 72 cystic lateral menisci by arthroscopic surgery. Meniscal tears were observed in all cases, and 69 of these had a horizontal cleavage component. Three types of tear were identified and may be progressive. Treatment was by arthroscopic resection of the meniscal tear, and decompression of the cyst through the substance of the meniscus. After a mean follow-up of 34 months the results were good or excellent in 64 knees (89%) and there were few complications. We recommend this technique as the treatment of choice for cysts of the lateral meniscus.