We evaluated the relationships among species in the genus Gelidiella using 47 rbcL and 29 COI sequences, including those from 18 specimens collected in Madagascar. Molecular analyisis revealed the presence of three major lineages among Magalasy Gelidiella which were assigned, based on morpho-anatomical observation, to Gelidiella acerosa, G. ligulata and a so far not described species for which we here proposed the name G. incrassata. Both molecular and morphological data demonstrated the presence of three species in Madagascar: the G. acerosa complex, G. ligulata, and G. incrassata sp. nov., described here. Gelidiella incrassata was collected on small gravel from the intertidal down to a depth of 14 m on the southeast coast of Madagascar. It is distinguished by its large size (up to 7 cm), opposite to alternate ramuli, thick-walled cortical and medullary cells, and stalked tetrasporangial stichidia with irregular arrangement of tetrasporangia. Phylogenetic analyses of rbcL and COI sequences revealed the sister relationship between G. incrassata and G. fanii from southeast Asia and Hawaii. Gelidiella acerosa comprised three genetic groups in Madagascar, each being genetically distinct (pairwise distances, 4.9–8.3% for COI and 1.2–2.3% for rbcL). Further sampling of G. acerosa is needed before taxonomic revisions can be proposed. The distribution of G. ligulata is expanded to include the southwest Indian Ocean.