Treatment of palmar midcarpal instability (PMCI) remains controversial and children can develop PMCI from asymptomatic hypermobility. Recently, case series have been published regarding the use of arthroscopic thermal shrinkage of the capsule in adults. Reports of the use of the technique in children and adolescents are rare, and there are no published case series.  In a tertiary hand center for children's hand and wrist conditions, 51 patients were treated with arthroscopy for PMCI between 2014 and 2021. Eighteen out of 51 patients carried additional diagnosis of juvenile idiopathic arthritis (JIA) or a congenital arthritis. Data were collected including range of movement, visual analog scale (VAS) at rest and with load, and grip strength. Data were used to determine the safety and efficacy of this treatment in pediatric and adolescent patients.  Mean follow-up was 11.9 months. The procedure was well tolerated and no complications were recorded. Range of movement was preserved postoperatively. In all groups VAS scores at rest and with load improved. Those who underwent arthroscopic capsular shrinkage (ACS) had significantly greater improvement in VAS with load, compared with those who underwent arthroscopic synovectomy alone (  = 0.04). Comparing those treated with underlying JIA versus those without, there was no difference in postoperative range of movement, but there was significantly greater improvement for the non-JIA group in terms of both VAS at rest (  = 0.02) and VAS with load (  = 0.02). Those with JIA and hypermobility stabilized postoperatively, and those with JIA with signs of early carpal collapse and no hypermobility achieved improved range of movement, in terms of flexion (  = 0.02), extension (  = 0.03), and radial deviation (  = 0.01).  ACS is a well-tolerated, safe, and effective procedure for PMCI in children and adolescents. It improves pain and instability at rest and with load, and offers benefit over open synovectomy alone. This is the first case series describing the usefulness of the procedure in children and adolescents, and demonstrates effective use of the technique in experienced hands in a specialist center.  This is a Level IV study.