Persistent pulmonary interstitial emphysema (PPIE) is a rare condition that occurs in both preterm and term infants. It is thought to arise from a disruption of the basement membrane of the alveolar wall allowing air entry into the interstitial space. The characteristic CT scan appearance of PPIE can be used to differentiate it from other congenital cystic lesions that may present similarly. Although conservative management is accepted as the initial form of management in most cases, a review of the published literature found that a significant proportion of localized PPIE cases eventually require surgical resection. This case illustrates that extensive bilateral PPIE associated with a persistent pneumomediastinum can resolve spontaneously thus demonstrating that conservative management without surgical intervention may be appropriate for some children. Pediatr Pulmonol. 2008; 43:615-619. © 2008 Wiley-Liss, Inc.