Retraction of the shoulder in internal rotation is observed in 25% of children with brachial plexus birth palsy (C5, C6 +/- C7). Early bone and joint deformities affecting the glenohumeral joint are the consequences. The stiff internal rotation requires surgical release which can involve the capsule and ligaments, muscles, or both. Internal release can be combined with muscle transfer to improve active external rotation. We report the results obtained with arthroscopic anterior capsular release combined with latissimus dorsi transfer. From 1999 through 2006, fourteen children with a stiff shoulder in internal rotation secondary to brachial plexus birth palsy were managed in our unit. All had recovered biceps function six months after surgery. The glenohumeral dysplasia was analyzed on the preoperative magnetic resonance imaging. Pre- and postoperative passive external rotation (RE) were measured with the arm along the body and at 90 degrees elbow flexion. Internal rotation was measured using the Mallet score (hand-back test). Combined active abduction antepulsion was measured when the child was playing. Mean age at surgery was three years six months. Arthroscopic internal release was performed for eight children. All had an associated latissimus dorsi transfer. Among the 14 children managed in the unit, arthrolysis was not be performed in six, either because of the lack of an adequate electrode (two patients) or because the child presented posterior glenohumeral dislocation making it impossible to introduce the optic channel (four patients). Arthroscopic anterior release was performed for the eight other patients. These eight patients were reviewed at a mean three-year follow-up. Passive external rotation was improved, with a mean gain of 60 degrees with no recovery of passive internal rotation. The abduction antepulsion movement was also improved, mean gain 90 degrees . A stiff shoulder in internal rotation can develop during the first two years of life. Several techniques have been proposed for internal release. The origin of the progressive limitation of passive external rotation remains a subject of debate. Is it due to retraction of the internal rotators, or to capsule-ligament retraction, or both? In 1992, Harryman et al. demonstrated the role of the capsule and the coracohumeral ligament in limiting external rotation. Consequently, we have opted for early release (less than two years of age) using an arthroscopic method limited to the capsule and ligaments. Our results for passive external rotation are comparable to those reported by others. However, this technique enables preserved mobility for internal rotation. Arthroscopic anterior release limited to the capsule and the ligaments is an effective, minimally invasive technique. Leaving the internal rotator muscles intact preserves internal rotation of the shoulder and reduces the risk of anterior instability.