A cyst in the kidney begins as an out-pouching of the nephron (functional unit of the kidney) and can occur anywhere along the length of the nephron. Approximately 70 percent of cysts detach from the nephron when they are still small, about 2 mm (1/8 inch) in diameter. Over time, the cysts enlarge and can become filled with clear fluid or fluid that contains blood or white blood cells.

Cysts can form in other organs, as well as the kidney; the most common extrarenal site is the liver. Current research suggests that liver cysts form from cells lining the bile ducts or tubules of the liver, rather than the liver cells themselves. It appears that rather than take the place of functioning liver cells, cysts merely push the liver cells aside. This is why liver cysts don’t cause liver failure even though the liver can become quite enlarged due to cysts.