We describe a patient with acute encephalopathy with biphasic seizures and late reduced diffusion (AESD) with unique features, including concurrent transverse myelitis. A 2‐year‐old previously healthy girl had clinical findings consistent with AESD, occurring in association with influenza A infection. The posterior brain regions were most severely affected, resulting in cortical blindness. She also developed bilateral limb weakness, and spine MRI revealed transverse myelitis in the cervical region. She was treated acutely with intravenous methylprednisolone. Serum anti‐myelin oligodendrocyte glycoprotein and anti‐aquaporin‐4 antibodies were negative, as was an anti‐extractable nuclear antigen panel. Although her clinical presentation was severe, she improved dramatically over the following months, and 6 months following initial presentation, her parents felt she had returned to baseline. This is the first report of AESD occurring in combination with transverse myelitis. The co‐occurrence of the two conditions is unlikely to be coincidental, suggesting that there may be a shared or overlapping immunological pathway involved. The patient's recovery was impressive, which could partially relate to the acute treatment with corticosteroids.