The pathophysiology of congenital and neonatal hydrocephalus is not well understood although the prognosis for patients with this disorder is far from optimal. A major obstacle to advancing our knowledge of the causes of this disorder and the cellular responses that accompany it is the multifactorial nature of hydrocephalus. Not only is the epidemiology varied and complex, but the injury mechanisms are numerous and overlapping. Nevertheless, several conclusions can be made with certainty: the age of onset strongly influences the degree of impairment; injury severity is dependent on the magnitude and duration of ventriculomegaly; the primary targets are periventricular axons, myelin, and microvessels; cerebrovascular injury mechanisms are prominent; gliosis and neuroinflammation play major roles; some but not all changes are preventable by draining cerebrospinal fluid with shunts and third ventriculostomies; cellular plasticity and physiological compensation probably occur but this is a major under-studied area; and pharmacologic interventions are promising. Rat and mouse models have provided important insights into the pathogenesis of congenital and neonatal hydrocephalus. Ependymal denudation of the ventricular lining appears to affect the development of neural progenitors exposed to cerebrospinal fluid, and alterations of the subcommissural organ influence the patency of the cerebral aqueduct. Recently these impairments have been observed in patients with fetal-onset hydrocephalus, so experimental findings are beginning to be corroborated in humans. These correlations, coupled with advanced genetic manipulations in animals and successful pharmacologic interventions, support the view that improved treatments for congenital and neonatal hydrocephalus are on the horizon.