Two new species of lycophytes, Selaginella obovata and S. zhangii, were discovered in southeastern Yunnan, China. Selaginella obovata is characterized by the prostrate habit and relatively small size of plant, obovate median leaves, and short, dorsiventral strobili, and is not apparently similar to any known species. Phylogenetic analyses of plastid sequences (rbcL, atpI, psbA) indicated that S. obovata is closely allied to S. bisulcata, which is also supported by spore morphology, and that these two taxa together with S. pennata constitute a well-supported monophyletic group. Selaginella zhangii is comparable to S. rolandi-principis in their broad stems and shape and arrangement of vegetative leaves; but the former differs from the latter in its prostrate habit and dorsiventral strobili. The results of phylogenetic analyses indicated that S. zhangii is allied to S. heterostachys in the S. heterostachys–S. ciliaris clade, while S. rolandi-principis is distantly placed in the S. doederleinii–S. involvens clade. Finally, we provide comprehensive descriptions, photographs of living plants, line drawings, and scanning electron micrographs of spores to facilitate their recognition.