The Phoronida, which is one of the smallest phyla of invertebrates, includes only 13 valid species, although ∼40 larval forms of phoronids were recently described. This report uses light microscopy and molecular methods to describe a new phoronid species, Phoronis embryolabi Temereva & Chichvarkhin, sp. nov. The morphology of P. embryolabi, which lives commensally in the burrows of Axiidea shrimp Nihonotrypaea japonica in Vostok Bay (the Sea of Japan), is extremely similar to that of Phoronis pallida Silen, 1952; the bodies of both species exhibit specific regionalisation. However, the organisation of the metanephridia differs between P. pallida and P. embryolabi. Moreover, P. embryolabi has a unique type of development, viviparity, in which mothers release fully developed larvae into the environment. In all other phoronid species, the spawning occurs as a release of fertilised eggs or early embryos. Viviparity of completely developed larvae has not been previously described for any phoronid. According to analysis of partial 28S rRNA, P. embryolabi is close to Phoronis pallida. On the other hand, analysis of partial cytochrome c oxidase subunit I indicated a unique position of P. embryolabi among phoronids. These results should be used for revision of phoronid taxonomy (i.e. the type of development should be considered as characteristic of subgenera within the genus Phoronis). This report also establishes the relationship between P. embryolabi and an Actinotrocha sp. that was described in a previous paper.