Desarmillaria caespitosa, a North American vicariant species of European D. tabescens, is redescribed in detail based on recent collections from the USA and Mexico. This species is characterized by morphological features and multilocus phylogenetic analyses using portions of nuc rDNA 28S (28S), translation elongation factor 1-alpha (tef1), the second largest subunit of RNA polymerase II (rpb2), actin (act), and glyceraldehyde-3-phosphate dehydrogenase (gpd). A neotype of D. caespitosa is designated here. Morphological and genetic differences between D. caespitosa and D. tabescens were identified. Morphologically, D. caespitosa differs from D. tabescens by having wider basidiospores, narrower cheilocystidia, which are often irregular or mixed (regular, irregular, or coralloid), and narrower caulocystidia. Phylogenetic analyses of five independent gene regions show that D. caespitosa and D. tabescens are separated by nodes with strong support. The new combination, D. caespitosa, is proposed.