Congenital dacryocystocele is a uncommon type of nasolacrimal duct obstruction. Differential diagnosis for masses in the medial canthal region of a newborn include encephalocele, hemangioma, nasal glioma, and dermoid cyst. Because of the risk of becoming infected (acute dacryocystitis) and potentially lethal due to septicemia, aggressive management, including admission for intravenous antibiotics and surgical removal, is now advocated by many pediatric ophthalmologists if the cyst cannot be decompressed. Because of the commonly associated nasal cyst, infants with nasolacrimal dacryocyctocele may also experience respiratory distress especially when breast-feeding. The following case of dacryocystocele, which had progressed to dacryocystitis, was misdiagnosed as an infantile hemangioma. It is important to diagnose this entity quickly and refer for appropriate antibiotic and surgical management to avoid more serious sequelae of sepsis and possible death.