Chiari III malformation, a rare and severe subtype of Chiari malformations, is frequently associated with hydrocephalus. The conventional treatment approaches for hydrocephalus in Chiari III malformations have mainly focused on ventriculoperitoneal (VP) shunting, but optimal methods and timing remain uncertain. We report a case of a newborn girl with Chiari III malformation who underwent surgical closure of an occipitocervical encephalocele and ventricular reservoir implantation on her third day of life. This procedure successfully managed her hydrocephalus without significant short-term complications. Three months post-surgery, she developed secondary external hydrocephalus, which was managed through subdural-peritoneal shunting, allowing her to thrive until at least five years of age. This case demonstrates the potential of ventricular reservoir implantation in treating hydrocephalus associated with Chiari III malformation and brings to light secondary external hydrocephalus, subsequently managed by VP shunting.