Intraparenchymal pericatheter cyst is rarely reported. Obstruction in the ventriculoperitoneal shunt leads to recurrence of hydrocephalus, signs of raised intracranial pressure and possibly secondary complications. Blockage of the distal catheter can result, unusually, in cerebrospinal fluid oedema and/or intraparenchymal cyst around the ventricular catheter which may produce focal neurological deficit. We report two cases of distal catheter obstruction with formation of cysts causing local mass effect and neurological deficit. Both patients had their shunt system replaced, which led to resolution of the cyst and clinical improvement. One patient had endoscopic exploration of the cyst which confirmed the diagnosis made on imaging studies. Magnetic resonance imaging was more helpful than computed tomography in differentiating between oedema and collection of cystic fluid. Early recognition and treatment of pericatheter cyst in the presence of distal shunt obstruction can lead to complete resolution of symptoms and signs.