Extrarenal teratoid Wilms’ tumor (TWT) is a variant of Wilms’ tumor with fewer than 30 cases reported in the literature. It comprises more than 50% heterologous tissue and presents a significant diagnostic challenge due to its complex histology. We report an unusual case of mediastinal teratoma with nephroblastomatous elements in an 8-year-old female. The patient presented with respiratory distress, fever, weight loss, and a large anterior mediastinal mass. Imaging revealed a heterogeneous tumor containing fat, fluid, and calcification, suggestive of a teratoma. Surgical resection confirmed a mature cystic teratoma with foci of nephroblastoma. Pathological analysis demonstrated a mixture of ectodermal, mesodermal, and endodermal tissues alongside nephroblastomatous components. Immunohistochemistry was positive for Wilms Tumor 1 and other relevant markers, confirming the diagnosis. The patient had an uneventful postoperative course and was discharged after three days. This case adds to the growing body of research on extrarenal TWT, particularly its occurrence in the mediastinum, a rare site for such tumors. A literature review highlighted that extrarenal TWT often affects children, typically presenting in the retroperitoneum or sacrococcygeal regions, with varying recurrence rates and long-term outcomes. This case underscores the importance of histopathological and immunohistochemical analysis in diagnosing TWT and differentiating it from other mediastinal tumors to ensure appropriate treatment planning, emphasizing the need for long-term follow-up due to the potential for recurrence or metastasis. This paper also provides an in-depth look at nephron development and nephrogenic rests, highlighting the structural and functional aspects of nephrogenesis and the factors that disrupt it in fetal kidneys.