There are only four polyclad flatworms currently known from temperate waters of Victoria, Australia, although these turbellarians are common inhabitants of rocky shores. A new stylochid flatworm, Stylochus pygmaeus sp. nov. (Platyhelminthes, Polycladida) or oyster leech is described here from Port Philip Bay, Victoria. This flatworm was observed feeding on three species of barnacles by extending its pharynx over its prey and extruding copious amounts of mucus. Worms also preferred to prey on larger‐sized barnacles regardless of the species. Further observations indicated that these worms deposited eggs at night inside empty barnacle shells. Each eggmass was brooded for several days with the worms only moving off to feed. Each egg capsule contained multiple embryos and after 5 or 6 days, positively photo‐tactic, four‐lobed Gotte's larvae emerged. Larvae metamorphosed to juvenile flatworms 1–2 weeks post‐hatching but failed to settle and survive.