Traction injury to the brachial plexus sustained during the birth process that results in impaired neuromuscular function of the upper extremity continues to occur despite advances in modern obstetric care. The most common pattern of injury usually results in motor weakness of shoulder external rotation, leading to internal rotation contractures and subsequent deformity of the skeletally immature glenohumeral joint. Understanding of these deformities and effective surgical intervention have advanced greatly over the past decade. Restoration of balance between internal and external rotation forces around the shoulder has great potential for remodeling of the glenohumeral joint in the young child. Arthroscopic-directed release of the contracture, with select use of latissimus dorsi transfer to provide external rotation power, has proved to be effective for many children with these contractures.