Treatment of painful internal snapping hip via arthroscopic release of the iliopsoas tendon is becoming the preferred option over open techniques because of the benefits of minimal dissection and fewer complications. However, complications do occur with arthroscopic techniques as well. We present the case of a 33-year-old woman who presented with painful internal snapping of her right hip and underwent arthroscopic release of the iliopsoas tendon. Following the procedure she continued to complain of pain in her groin and was therefore investigated further with a magnetic resonance imaging (MRI) which revealed a swelling near the femoral circumflex vessels. A computed tomography (CT) angiogram revealed a 15 mm pseudoaneurysm of the femoral circumflex artery, which was successfully treated by selective catheterisation and embolisation. Hip arthroscopists should be sufficiently familiar with the vascular anatomy around the hip and keep this complication in mind when releasing the iliopsoas tendon arthroscopically especially in revision cases with adhesions.