Cysts of the kidney usually originate from the renal parenchyma after tubule obstruction; rarely pyelocalyceal cysts occur, originating from transitional urothelium. Neoplasia is a rare but possible complication. A 45-year-old man was found to have a cyst related to the right kidney. Computed tomography demonstrated minimal calcification in the wall (Bosniak II). Symptom-relieving percutaneous drainage yielded clear fluid; resultant cytology was negative. After rapid reaccumulation, laparoscopic deroofing was performed. No communication within the renal pelvis was detected however histology revealed transitional cell carcinoma. An open radical nephroureterectomy was performed; adjuvant chemotherapy was given. Three previous cases of malignancy in a pyelocalyceal cyst have been reported. This is the first reported after laparoscopic deroofing of a cyst. Despite widespread use of the Bosniak renal cyst classification, the management of category II cysts remains contentious. This case should serve as a warning to clinicians that seemingly benign cysts of the kidney may harbor underlying neoplasia. Intraoperative frozen section should be considered in all cases where preoperative imaging suggests Bosniak II classification.