To develop a staging system for congenital cholesteatoma in predicting the likelihood of residual disease. Retrospective analysis of data from a case series, to identify predictors of residual disease. Tertiary care pediatric hospital. Children undergoing surgical removal of congenital cholesteatoma. There were 156 patients, with 160 cholesteatomas; 4 children had bilateral disease. Each case was scored as to quadrants of the middle ear involved, ossicular involvement, and mastoid extension. Surgically confirmed residual disease at any time after the initial procedure. Four stages were defined as follows: stage I, disease confined to a single quadrant; stage II, cholesteatoma in multiple quadrants, but without ossicular involvement or mastoid extension; stage III, ossicular involvement without mastoid extension; and stage IV, mastoid disease. There was a strong association between stage and residual disease, ranging from a 13% risk in stage I to 67% in stage IV. This simple staging system may be particularly useful in standardizing the reporting of congenital cholesteatoma and in adjusting for severity in evaluating outcomes. It also provides information that is useful in counseling parents.