Abstract: A surgical instrument, particularly suited for arthroscopic surgery, for cutting tissue located at an interior site within the body of a patient. The instrument includes a body or handle portion from which an elongated stem extends. A blade is located at the free end of the stem. The blade includes a generally elongated cutting edge portion which extends generally parallel to the longitudinal axis of the instrument. Motor means is provided within the body portion for effecting the oscillation (reciprocal pivoting) of the cutting edge portion with respect to the body portion about the longitudinal axis through a small arc, e.g. 20.degree.-25.degree.. A retractable/extendable shroud (sheath) is provided to cover the blade and stem to enable the blade end of the instrument to be readily inserted into the body of the patient through a small opening while preventing exposure of any surrounding tissue to the blade. The shroud is retractable to expose the blade when cutting is desired.