An eight-month-old girl presented with congenital exotropia and latent nystagmus. Further evaluation revealed congenital ptosis of the left eye and restriction of the elevation, depression and adduction of the left eye. A diagnosis of congenital oculomotor palsy was made. At the age of three months she had been examined by the neurologist because of retarded psychomotor development. All laboratory investigations were normal. At the age of eight months, a CT scan of the brain and orbit was found to be normal. The patient was treated for amblyopia. At the age of five, strabismus surgery was performed, and a large fibrous tumor encapsulating the superior and lateral rectus muscle was found. A biopsy was taken and pathology showed fibrous tissue containing a hair. Based on the clinical history, the diagnosis of a perinatally ruptured orbital dermoid cyst was made. Review of the previous CT and an additional CT showed enlargement of the left lateral orbital wall with a notch in the lateral wall, indicative of a dermoid cyst.