Several specimens of a lichen-inhabiting Tremella, inducing the formation of pale yellow, dark brown or black galls on species of Diploschistes, have been collected in three localities in Sweden and in one locality in the USA. Morphological and molecular studies confirm that this material represents a single species, which differs from other described Tremella species in the combination of gall morphology, basidium morphology, basidium and basidiospore sizes, presence of thick-walled hyphidia, and a different host-selection. We consequently describe this fungus as Tremella diploschistina sp. nov., on the basis of morphology and phylogenetic analyses of ITS and nLSU sequences. The phylogenetic analyses reveal that the fungus clearly belongs in Tremella, although the relationships with other species in the genus remain unclear.