A new genus of freshwater ascomycetes, Paoayensis lignicola collected from Paoay Lake in Ilocos Norte, in the Philippines is described and illustrated and compared with analogous taxa. Paoayensis lignicola is characterized by immersed, slightly erumpent ascomata with openings that fuse into a single ostiole. Asci are unitunicate, clavate and short pedicellate with a discoid refractive apical ring and ascospores are lemoniform, brown to dark brown and with an unusual germ slit. Characters suggest that the genus should be placed in the Sordariales, however, placement at the familial level is not clear. Molecular based phylogenies using 18S rDNA sequence data indicates a close relationship to Xylomelasma sordida and Ceratostomella pyrena whose taxonomic placement is still obscure. 28S rDNA based phylogenies, on the other hand, depicts a close affiliation with members of the Annulatascaceae which are freshwater ascomycetes. An appropriate familial placement for Paoayensis lignicola is still unknown (Sordariomycetes incertae sedis).