A new species of lycaenid butterfly, Paralucia crosbyi sp. nov. (Theclinae: Luciini), is described, diagnosed and illustrated from Namadgi National Park, ACT, and adjacent areas in New South Wales in the highlands of south‐eastern Australia. It is most similar to Paralucia spinifera E.D. Edwards & Common, 1978, but comparative morphology of the adult and immature stages indicates fundamental differences between the two species. Maximum Likelihood phylogenetic analysis of mitochondrial cytochrome oxidase subunit I (COI) of all Paralucia species recovered P. crosbyi sp. nov. and P. spinifera as reciprocally monophyletic, with a mean uncorrected ‘p’ pairwise divergence of 0.93%. Paralucia crosbyi sp. nov. appears to be a narrow‐range endemic, restricted to dry montane eucalypt open woodland or woodland between 920 and 1130 m asl, in which the mean annual rainfall varies from 700 to 800 mm and where an abundance of the larval food plant Bursaria spinosa Cav. subsp. lasiophylla (E.M.Benn.) L. Cayzer, Crisp & I. Telford (Pittosporaceae) and colonies of the attendant ant Anonychomyrma sp. (itinerans species group) (Dolichoderinae) are established. The immature stages are described, illustrated and compared with those of P. spinifera and P. aurifera (Blanchard, [1848]). Despite being limited to high altitudes, adults fly in late winter–early spring (late July to early October). The species is univoltine, with much of the year (~9 months) passed in the pupal stage. The ecology, biology and life cycle are discussed, and a likely mode of speciation is hypothesised.