Para-urethral cyst, arising from cystic dilatation of a paraurethral gland in a female, is rarely reported in neonatal age group. The low frequency and little awareness about its clinical course may lead to inappropriate management. The choice of treatment for this lesion still remains controversial. Surgical excision has been advocated, but non-operative treatment is also gaining popularity nowadays. We are hereby reporting a symptomatic female neonate, whose paraurethral cyst was managed surgically with good recovery. The purpose of this report is to clarify the natural course of paraurethral cysts in female neonates and to generate awareness among physicians and surgeons for correct diagnosis and proper management. The embryology, clinical features and various treatment options are discussed along with the management of our case.