A new species of dragonet, Callionymus petersi from northern New Ireland Province, Papua New Guinea, is described on the basis of five specimens collected with dredges and trawls in about 181–207 m depth from off northwestern New Hanover and off Kavieng. The new species is characterized within the subgenus Bathycallionymus by a short head (3.9–4.3 in SL); eye large (2.1–2.3 in head length); preopercular spine with a long, slightly upcurved main tip, a small antrorse serra followed by two large curved points on its dorsal margin and a strong antrorse spine at its base, ventral margin smooth, slightly concave; first dorsal fin higher than second dorsal fin in the male, slightly lower than second dorsal fin (female), with 4 spines, first spine filamentous (male only); second dorsal-fin high, distally convex (male) or low, distally nearly straight (female), with 9 unbranched rays (last divided at base); anal fin with 9 unbranched rays (last divided at base); 18 pectoral-fin rays; caudal fin elongate (male), the two median rays unbranched, elongate but barely filamentous (male), or distally rounded, without filaments (female); pectoral-fin base with a large dark blotch; sides of body with a series of dark blotches, each of the anterior blotches broken into 2–4 vertical dark streaks; first dorsal fin with a large ocellated black blotch extending over the second and third membranes (male), or mostly confined to the third membrane (female); second dorsal fin pale (male) or spotted with grey; anal fin distally dark (male), with distal dark spots (female); caudal fin with a grey streak in lower section (male), or lowermost membrane black (female). The new species is compared with similar species. Revised keys to callionymid fish species of New Guinea, as well as of the subgenus Bathycallionymus, are presented.