Hygrocybe pellucida sp. nov. is described from Kerala State, India based on both morphology and multigene phylogenetic analyses (nrITS, nrLSU). This species is characterized by small, viscid, translucent basidiocarps, a whitish to grayish pileus with reddish pellucid striations, dimorphic basidiospores and basidia, a sterile lamella edge with abundant pseudocystidia, an ixotrichoderm-type pileipellis and an ixocutis-type stipitipellis. A comprehensive species description along with photographs of both the basidiocarps and the microscopic features, line drawings of the microscopic structures, a comparison with morphologically similar and phylogenetically related species and phylogenetic trees inferring the placement of the new species within the section Velosae are provided.