Stiphodon chlorestes sp. nov. is described based on seven specimens collected from Taiwan and Luzon. It is a large‐sized Stiphodon species sharing the second dorsal‐fin rays 9–10 and pectoral‐fin rays 14–16 with similar‐sized congeners. However, it differs from them by the wider interorbital width and almost complete lack of scales on the occipital region in males. In addition, the new species can be further distinguished from all congeners by seven to eight oval bands or a black longitudinal band on the lower body, black and white spots on pectoral fins, and a short red or orange line on posterior upper edge of caudal fin. Molecular analysis based on the 680‐bp mitochondrial cytochrome oxidase subunit I (COI) fragments also supports it as a distinct species belonging to the “Stiphodon elegans group” and a sister group of the clade consisting of Stiphodon multisquamus and Stiphodon palawanensis.