Simple SummaryMany caterpillar species can produce toxins that cause harmful reactions to humans, varying from mild irritation to death. Currently, there is very limited knowledge about caterpillar toxin diversity, because only a few species have been investigated. We used the transcriptome technique to identify candidate toxin genes from the nettle caterpillar Parasa lepida (Cramer, 1799). It is a common pest of oil palm, coconut, and mango in South and South-East Asia, which can cause severe pain and allergic responses to those in contact with them. We reported 168 candidate toxin genes. Most of them are members of the toxin genes families commonly recruited in animal venoms such as serine protease and serine protease inhibitors. However, we identified 21 novel genes encoding knottin-like peptides expressed at a high level in the transcriptome. Their predicted 3D structures are similar to neurotoxins in scorpion and tarantula. Our study suggests that P. lepida venom contains diverse toxin proteins that potentially cause allergic reactions and pain. This study sheds light on the hidden diversity of toxin proteins in caterpillar lineage, which could be future fruitful new drug sources.Many animal species can produce venom for defense, predation, and competition. The venom usually contains diverse peptide and protein toxins, including neurotoxins, proteolytic enzymes, protease inhibitors, and allergens. Some drugs for cancer, neurological disorders, and analgesics were developed based on animal toxin structures and functions. Several caterpillar species possess venoms that cause varying effects on humans both locally and systemically. However, toxins from only a few species have been investigated, limiting the full understanding of the Lepidoptera toxin diversity and evolution. We used the RNA-seq technique to identify toxin genes from the stinging nettle caterpillar, Parasa lepida (Cramer, 1799). We constructed a transcriptome from caterpillar urticating hairs and reported 34,968 unique transcripts. Using our toxin gene annotation pipeline, we identified 168 candidate toxin genes, including protease inhibitors, proteolytic enzymes, and allergens. The 21 P. lepida novel Knottin-like peptides, which do not show sequence similarity to any known peptide, have predicted 3D structures similar to tarantula, scorpion, and cone snail neurotoxins. We highlighted the importance of convergent evolution in the Lepidoptera toxin evolution and the possible mechanisms. This study opens a new path to understanding the hidden diversity of Lepidoptera toxins, which could be a fruitful source for developing new drugs.