The systematic position of two strains of a yeast-like fungus isolated from plant remnants on the Kharg Island in the Persian Gulf of Iran is evaluated using morphological, physiological and phylogenetic analyses. In culture, this fungus produced cylindrical cells that reproduced by polar budding on short stalks. Production of ballistoconidia and blastospores was observed. The carbon source assimilation spectrum was broad, but fermentation ability was absent. Phylogenetic analyses of the nuclear SSU, LSU (D1/D2 domain), and ITS rDNA revealed that this fungus represents a new lineage in the Urocystidales of the subphylum Ustilaginomycotina. Based on the comparison of phenotypic characters, physiology, and DNA sequences, a new genus and species Fereydounia khargensis (IBRC-M 30116 T  = CBS 13305 T ) is described for this fungus and accommodated in the novel family Fereydouniaceae. This is the first report of anamorphic saprobic fungus residing in the Urocystidales, stressing the remarkable evolutionary diversity in the subphylum Ustilaginomycotina.