The informal taxon ‘genus Chile’ of Brundin, based solely on pupal exuviae of a podonomine Chironomidae, has remained inadequately known for half a century. New collections reveal life associations, and provide molecular data to hypothesise a precise phylogenetic placement in the austral Podonominae. A densely sampled molecular phylogeny based on two nuclear and one mitochondrial DNA markers shows ‘genus Chile’ to be the sister group to Podonomopsis Brundin, 1966. Within Podonomopsis a clade of South American species is sister to all Australian species. We discuss how to rank such a sister group taxon and treat ‘genus Chile’ as a new subgenus Araucanopsis, subg. nov. with the new species, Podonomopsis (Araucanopsis) avelasse, sp. nov. from Chile and Argentina as genotype of the monotypic subgenus. We describe P. (A.) avelasse in all stages and provide an expanded diagnosis and description of Podonomopsis to include Araucanopsis. A dated biogeographic hypothesis (chronogram) infers the most recent common ancestor (tmcra) of expanded Podonomopsis at 95 million years ago (Mya) (68–122 Mya 95% highest posterior density), ‘core’ Podonomopsis at 83 Mya (58–108) and Australian Podonomopsis at 65 Mya (44–87). All dates are before the South America–Australia geological separation through Antarctica, supporting previous conclusions that the taxon distribution is ‘Gondwanan’ in origin. Podonomopsis, even as expanded here, remains unknown from New Zealand or elsewhere on extant Zealandia.