A new species of Didymium (Myxomycetes), D. xerophilum, is described, and some details of its life cycle are provided. The new species was collected during studies of arid areas of Argentina and Peru. It can be distinguished by the persistent funnel-shaped invagination of the peridium, the top of which appears as a deep umbilicus in closed sporothecae, and the calcareous hypothallus shared among several sporocarps. This combination of characters, with a circumscissile dehiscence of the sporotheca and a cream stalk packed with rhombic lime crystals, is unknown in other described species. Morphology was examined with scanning electron microscopy and light microscopy, and micrographs of relevant details are included here. Phylogenetic analysis with 18S rDNA sequences of different species of Didymium supports the distinct identity of this new species. Some collections of this myxomycete were made at up to 4600 m, an altitude almost unknown for this group of microorganisms.