Clavulina incrustata is described from Atlantic Forest of Pernambuco, Northeast Brazil, and is characterized by the branched basidiomata, hymenium pale vinaceous fading to very pale cream-vinaceous, small subglobose to broadly ellipsoidal basidiospores, and context hyphae bearing ferrugineous brown incrusted matter. Illustrations of the holotype and a key for Neotropical taxa are provided.