The pygmygoby Trimma albicaudatum sp. nov. is described on the basis of a single specimen (18.0 mm standard length) from Sagami Bay, Honshu, Japan. The new species can be distinguished from all congeners by the following combination of characters: VI-I, 9 dorsal-fin rays, no elongate spines on first dorsal fin; I, 8 anal-fin rays; 18 pectoral-fin rays, all unbranched; 8.5 anterior transverse scales; 7 cycloid scales along predorsal midline; fifth segmented ray of pelvic fin unbranched, its length less than half of fourth ray (viz., 43.2%); pelvic frenum absent; interorbital groove shallow; interorbital width less than half pupil diameter (viz., 46.3%); cheek without scales; sensory papillae row c comprising 6 papillae; opercle with two embedded cycloid scales dorsally; ground color of body yellow when freshly collected (greenish in life); snout, tip of lower jaw, interorbital space, and upper and lower parts of iris violet when fresh and in life; a dorsoventral pair of pink blotches on caudal peduncle when freshly collected (white in life); dorsoventral margins of yellow area of caudal fin tinged with orange red, distally darkened when freshly collected and in life; lower corner of caudal fin with a white triangular patch when freshly collected and in life; preserved specimens with several dusky smudges on caudal fin, most distinctive on lower lobe and forming an irregular stripe (also apparent in freshly collected specimens). Trimma albicaudatum is most similar to Trimma caudipunctatum Suzuki and Senou 2009 and Trimma imaii Suzuki and Senou 2009, both sharing characteristic coloration (yellow body with violet snout and forehead when freshly collected and in life). However, T. albicaudatum differs from T. caudipunctatum in the number of anterior transverse scales (7 in the latter), and from T. imaii in having embedded scales on the upper opercle (absent in the latter). The typical caudal peduncle markings in T. albicaudatum also differ in the other two species.