Introduction Posterior cervical fusion is commonly performed for cervical spine instability and fractures. However, dural injury may result in cerebrospinal fluid leakage, pseudomeningocele, and, rarely, hydrocephalus. These complications may lead to substantial neurological deterioration and functional decline. We report a rare case of severe cognitive impairment and dysphagia caused by postoperative CSF leakage–associated hydrocephalus after C1–2 fusion and highlight the role of comprehensive rehabilitation in functional recovery. Case presentation A 67-year-old woman sustained a type III odontoid fracture and was initially managed with halo-vest immobilization. Because of fracture nonunion, posterior C1–2 fusion was performed. One month after surgery, she developed progressive mental status deterioration, confusion, and severe functional impairment. Brain computed tomography revealed progressive hydrocephalus, and cervical spine magnetic resonance imaging demonstrated a large posterior fluid collection consistent with pseudomeningocele. Revision surgery and ventriculoperitoneal shunt placement were performed. However, the patient remained bedridden with persistent vomiting, severe cognitive impairment, dysphagia requiring nasogastric tube feeding, and generalized deconditioning. Three months after revision surgery, her neurological condition stabilized and rehabilitation was initiated. Intensive and individualized rehabilitation, including cognitive rehabilitation, swallowing therapy was implemented. After three months of rehabilitation, the patient demonstrated gradual improvement in cognitive function, swallowing function, and mobility, ultimately achieving independent standing and ambulation using a walker. Conclusion Postoperative CSF leakage–associated hydrocephalus and pseudomeningocele may lead to severe cognitive, swallowing, and functional impairments beyond structural complications alone. Comprehensive, individualized rehabilitation should be considered an essential component of care to maximize neurological and functional recovery.