We report the emergence of a novel lineage of SARS-CoV-2 in South America, termed C.37. It presents a deletion in the ORF1a gene (Δ3675-3677), also found in variants of concern (VOCs) Alpha, Beta, and Gamma, and seven non-synonymous mutations in the Spike gene (Δ247-253, G75V, T76I, L452Q, F490S, T859N). Initially reported in Lima, Peru, in late December 2020, it now accounts for almost 100% of Peruvian genomes in April 2021. It is expanding in Chile and Argentina, and there is evidence of onward transmission in Colombia, Mexico, the USA, Germany, and Israel. On June 15, 2021, the World Health Organization designated C.37 as Variant of Interest (VOI) Lambda.