Many animal species can produce venom for defense, predation, and competition. The venom usually contains diverse peptide and protein toxins, including neurotoxins, proteolytic enzymes, protease inhibitors, and allergens. Some drugs for cancer, neurological disorders, and analgesics were developed based on animal toxin structures and functions. Several caterpillar species possess venoms that cause varying effects on humans both locally and systemically. However, toxins from only a few species have been investigated, limiting the full understanding of the Lepidoptera toxin diversity and evolution. We used the RNA-seq technique to identify toxin genes from the stinging nettle caterpillar, Parasa lepida (Cramer, 1799). We constructed a transcriptome from caterpillar urticating hairs and reported 34,968 unique transcripts. Using our toxin gene annotation pipeline, we identified 168 candidate toxin genes, including protease inhibitors, proteolytic enzymes, and allergens. The 21 P. lepida novel Knottin-like peptides, which do not show sequence similarity to any known peptide, have predicted 3D structures similar to tarantula, scorpion, and cone snail neurotoxins. We highlighted the importance of convergent evolution in the Lepidoptera toxin evolution and the possible mechanisms. This study opens a new path to understanding the hidden diversity of Lepidoptera toxins, which could be a fruitful source for developing new drugs.