Extragonadal teratoma is the most common congenital tumor. The prognostic significance of the grade of immaturity and the presence of small foci of conventional yolk sac tumor (YST) in fetal and neonatal teratomas have not been determined. We report detailed histologic studies of 22 congenital teratomas, including eight tumors resected in utero for developing hydrops, and correlate the histologic features with initial serum alpha-fetoprotein (AFP) levels and clinical outcome. All fetal tumors that required in utero intervention were grade 3 immature teratomas, with admixed conventional YST in 44%. Among tumors resected postnatally, those presenting in utero were more commonly immature (71% vs. 50%). All initial post-surgical serum AFP levels were high, as expected in a neonate. No correlation was found between AFP elevation above the mean for gestational age and the presence of YST, hepatic differentiation, or immature endodermal glands in the tumor. Among 15 survivors with follow-up, 5 patients had malignant mixed germ cell tumors (immature teratoma with foci of conventional YST) and 5 had immature teratomas with foci of hepatic differentiation or immature endodermal glands with subnuclear vacuoles (so-called "well-differentiated YST"). No patient has developed recurrent or metastatic disease after treatment by complete surgical excision alone (mean follow-up, 37.6 months). The clinical behavior of congenital teratomas is determined predominantly by whether or not the tumor can be completely resected and in our study did not correlate with the grade of the teratoma or with the presence or absence of foci of hepatic tissue, immature intestinal glands, or foci of conventional YST.