Macrobrachium australe is an amphidromous prawn living in the insular freshwater systems of the Indo-Pacific. Because it possesses few informative morphological characters, that often vary from one habitat to another, M. australe has produced much taxonomic confusion and has historically been described under eight synonyms. Here, 53 specimens collected throughout the Indo-Pacific under the name M. australe were phylogenetically and morphologically examined. Results revealed that what has been called M. australe belongs to at least two distinct species: M. australe, distributed from the Southwest Indian Ocean to the Central Pacific Ocean, and a cryptic species potentially restricted to the Northwest Pacific Ocean, here identified as M. ustulatum, which until now was considered as a junior synonym. Although they are not quite found in the same habitat (lentic-lotic), the presence of these distinct, and reciprocally monophyletic entities in the same rivers on the islands of Palau and Santo strongly favors the hypothesis of two reproductively isolated entities. Six morphological characters, including the proportions of the joints of the male second pereiopod, the shape of the epistome lobe and the armature of the fourth thoracic sternite, are evidenced as diagnostic. A neotype of M. australe is designated and deposited in the Muséum national d’Histoire naturelle in Paris.