A new damselfish species, Pomacentrus andamanensis n. sp., is described from 45 specimens, 19.8–64.3 mm SL, collected from Indian Ocean coral reefs, in the Andaman Sea off western Thailand. It also occurs in the Andaman Islands, Myanmar, and the northwestern tip of Sumatra, on the basis of collections (with tissue sampling), underwater photographs, and observations. It is a sibling species of Pomacentrus amboinensis from the Western Pacific Ocean, but differs from it and the Micronesian species of the complex, Pomacentrus bipunctatus, primarily in the adult color pattern, in particular a conspicuous ocellus on the rear dorsal fin in adults, which is only found on juveniles of the other species. Most meristic values are the same, but the range of total gill rakers differs, although with some overlap. An analysis of the mtDNA control-region sequences for the new species shows a deep divergence of 21% from 7 populations of Pacific P. amboinensis.