Heliocybe villosa sp. nov. from southern China, is described, illustrated and discussed here based on its distinct morphological characters and molecular data. It is characterized by a yellowish brown pileus densely covered with orange brown villous hairs or flocci, white and close lamellae with serrated edge, broadly cylindric to subreniform basidiospores 7–9 × 3–3.5 μm, and monomitic hyphal system without clamp connections. Phylogenetic analysis based on the internal transcribed spacer (ITS) region further confirmed its placement in Heliocybe, and the second recorded species for this genus.