OBJECTIVE Posttraumatic hydrocephalus (PTH) is a frequent sequela of traumatic brain injury (TBI) and complication of related cranial surgery. The roles of PTH and the timing of cerebrospinal fluid (CSF) shunt placement in TBI outcome have not been well described. The goal of this study was to assess the impact of hydrocephalus and timing of ventriculoperitoneal (VP) shunt placement on outcome during inpatient rehabilitation after TBI. METHODS In this cohort study, all TBI patients admitted to Craig Hospital between 2009 and 2013 were evaluated for PTH, defined as ventriculomegaly, and hydrocephalus symptoms, delayed or deteriorating recovery, or elevated opening pressure on lumbar puncture. Extent of ventriculomegaly was quantified by the Evans index from CT scans. Outcome measures were emergence from and duration of posttraumatic amnesia (PTA) and functional status as assessed by means of the Functional Independence Measure (FIM). Findings in this group were compared to findings in a group of TBI patients without PTH (controls) who were admitted for inpatient rehabilitation during the same study period and met specific criteria for inclusion. RESULTS A total of 701 patients were admitted with TBI during the study period. Of these patients, 59 (8%) were diagnosed with PTH and were included in this study as the PTH group, and 204 who were admitted for rehabilitation and met the criteria for inclusion as controls constituted the comparison group (no-PTH group). PTH was associated with initial postinjury failure to follow commands, midline shift or cistern compression, subcortical contusion, and craniotomy or craniectomy. In multivariable analyses, independent predictors of longer PTA duration and lower FIM score at rehabilitation discharge were PTH, emergency department Glasgow Coma Scale motor score < 6, and longer time from injury to rehabilitation admission. PTH accounted for a 51-day increase in PTA duration and a 29-point reduction in discharge FIM score. In 40% of PTH patients with preshunt CT brain imaging analyzed, ventriculomegaly (Evans index > 0.3) was observed 3 or more days before VP shunt placement (median 10 days, range 3-102 days). Among PTH patients who received a VP shunt, earlier placement was associated with better outcome by all measures assessed and independently predicted better FIM total score and shorter PTA duration. CONCLUSIONS Posttraumatic hydrocephalus predicts worse outcome during inpatient rehabilitation, with poorer functional outcomes and longer duration of PTA. In shunt-treated PTH patients, earlier CSF shunting predicted improved recovery. These results suggest that clinical vigilance for PTH onset and additional studies on timing of CSF diversion are warranted.