ABSTRACT Algal turfs are ecosystem engineers receiving steadily growing attention in recent years in relation to their expansion on temperate reefs due to global change. However, their species diversity and taxonomy are still poorly understood, mostly based solely on morphological information. Algal turfs are the dominant type of assemblage in Macaronesia, but molecular diversity surveys have barely been applied in this region. We aim to show how molecular tools can assist us to improve our understanding of the diversity and taxonomy of natural algal turfs by studying the turf-forming rhodomelacean genus Stichothamnion which has only one recognized species in Macaronesia, the generitype S. cymatophilum. Stichothamnion resembles other members of the tribe Streblocladieae, but it has unbranched trichoblasts, an unusual character in the family. Here, we show using phylogenetic analyses of the rbcL gene that specimens collected in the Canary Islands and the Azores identifiable morphologically as S. cymatophilum exhibit cryptic diversity, and these analyses position Stichothamnion in the Vertebrata clade with full support. We place Stichothamnion in synonymy with Vertebrata, transfer the existing species, and describe a newly discovered cryptic species as V. barbarae Muñoz-Luque & Díaz-Tapia, sp. nov., found exclusively in the Azores. The new species was morphologically indistinguishable from V. cymatophila but diverged by 2.1–2.3% in the rbcL gene. This study illustrates the work required to better understand the extraordinary species diversity in algal turfs such as those in Macaronesia which remain taxonomically under-studied.