We describe a new remarkable dwarf and apparently acaulescent species of Carex (Cyperaceae) from the Andes of northern Chile: Carex phylloscirpoides. Morphological and molecular data (two nuclear and three plastid DNA regions) were used to study the phylogenetic placement and systematic relationships of this species, which resulted in its assignment to Carex section Racemosae. However, despite being related to the other three species of the section present in the Southern Cone based on phylogenetic evidence, it displays a number of unusual morphological features. In addition, it is geographically disjunct and genetically differentiated from them. A preliminary conservation assessment was performed which resulted in the proposal of the Critically Endangered category at the global level under IUCN guidelines. We discuss the biogeographic and ecological peculiarities of the new species and its allies, with emphasis in the high number of acaulescent sedges present in South America. The features of C. phylloscirpoides emphasize its unique evolutionary position and its rarity highlights its conservation importance, especially in the context of the South American Andean flora.