We present a patient with a large pulmonary hydatid cyst compressing underlying lung, with previous pulmonary tuberculosis, who presented in respiratory failure. After institution of thoracic epidural anaesthesia employing 0.25% bupivacaine, 1% lignocaine and fentanyl, the patient was placed in the sitting position and the hydatid cyst excised and drained after a limited rib resection. An air leak persisted until the 16th postoperative day. A marked improvement in symptoms as well as in spirometry and arterial blood gases occurred, and the patient was discharged on the 20th day. Thoracic epidural anaesthesia may be a safer method than general anaesthesia for removal of a hydatid cyst in a patient with severe respiratory compromise.