The Indo-Pacific labrid fish genus Paracheilinus now contains 20 species. Most of the currently known species inhabit the mega-diverse East Indian region including Paracheilinus angulatus, P. carpenteri, P. cyaneus, P. filamentosus, P. flavianalis, P. lineopunctatus, P. nursalim, P. rennyae, P. togeanensis, P. walton, as well as three recent discoveries described as new species herein. Five species are known from the Red Sea and Indian Ocean, including P. attenuatus (Seychelles and Kenya), P. hemitaeniatus (Madagascar and South Africa), P. mccoskeri (Kenya, Comoro Islands and Arabian Gulf to Andaman Sea), P. octotaenia (Red Sea), and P. piscilineatus (Mauritius). The remaining two species, P. bellae and P. rubricaudalis, are mainly confined to Micronesia/Marshall Islands and PNG/Fiji/Vanuatu, respectively. Members of the genus are typically distinguished on the basis of their caudal-fin and dorsal-fin shapes, the presence or absence of elongate filamentous dorsal-fin rays, and, in particular, the color of terminal-phase (TP) males, including their dramatic nuptial-display patterns. Paracheilinus paineorum n. sp. is described from 8 specimens, 43.1-70.0 mm SL, collected in Indonesia (southwestern Flores, Sulawesi, Nusa Penida, East Borneo, and Seribu Islands) in depths of 10-65 m. It is closely related to the allopatric P. filamentosus and P. xanthocirritus n. sp., differing mainly in coloration (particularly the bright red dorsal-fin markings) and larger maximum size (to at least 70 mm SL). Paracheilinus xanthocirritus n. sp. is described from 12 specimens, 33.9-49.3 mm SL, collected in the South China Sea at the Anambas Islands of Indonesia and Brunei in depths of 15-25 m. In contrast to the closely related P. paineorum n. sp., TP males of this species have a mostly yellow dorsal fin lacking red markings. The two new species further differ from P. filamentosus by having a narrower interorbital and a shorter caudal peduncle. A third new species, Paracheilinus alfiani, n. sp., is described on the basis of two specimens, 48.8 and 49.3 mm SL, from Lembata Island in the Lesser Sunda Islands of Indonesia. It is characterized by a rounded and relatively tall dorsal fin without elongate filamentous rays, a slightly rounded caudal fin, and distinctive TP male coloration. In addition to the new species descriptions, a diagnosis and color illustrations are included for all members of the genus. We also present a key to the species and a neighbor-joining tree of mitochondrial DNA sequences which clarifies the genetic relationships among species, revealing four discrete species complexes within the genus.