A new species, Botryocladia iridescens D.L.Ballant. et H.Ruiz is described from coral reef habitats in Puerto Rico. The new species possesses a brilliant and patterned iridescence and has been collected in mid- to deep-water cryptic reef habitats. Botryocladia iridescens is diminutive, to 7 mm high and with vesicles to 6 mm in diameter, and most commonly produces one or two primary vesicles on a short simple or once forked, solidly parenchymatous axis. Vesicle walls are composed of two medullary and two cortical layers. The vesicles are uniformly covered by a surface cortical layer and frequently anastomose laterally with contiguous vesicles of the same or adjacent plants. Spherical to pyriform gland cells are borne on inner medullary cells or medullary cells which project into the vesicle cavity. Regrowth of an axis from the base of old vesicles is common. Tetrasporangia are cruciately divided, measuring 14-20 m in diameter and are scattered in the cortex. Gametophytes are monoecious, the partially protuberant cystocarps measuring to 500 m in diameter. Spermatangia are located in discrete clusters and are cut off singly or in pairs from elongate spermatangial mother cells. The new species is also recorded from Grenada, West Indies.