Congracilaria babae was first reported as a red alga parasitic on the thallus of Gracilaria salicornia based on Japanese materials. It was circumscribed to have deep spermatangial cavities, coloration similar to its host and the absence of rhizoids. We observed a parasitic red alga with morphological and anatomical features suggestive of C. babae on a Hydropuntia species collected from Sabah, East Malaysia. We addressed the taxonomic affinities of the parasite growing on Hydropuntia sp. based on the DNA sequence of molecular markers from the nuclear, mitochondrial and plastid genomes (nuclear ITS region, mitochondrial cox1 gene and plastid rbcL gene). Phylogenetic analyses based on all genetic markers also implied the monophyly of the parasite from Hydropuntia sp. and C. babae, suggesting their conspecificity. The parasite from Hydropuntia sp. has a DNA signature characteristic to C. babae in having plastid rbcL gene sequence identical to G. salicornia. C. babae is likely to have evolved directly from G. salicornia and subsequently radiated onto a secondary host Hydropuntia sp. We also recommend the transfer of C. babae to the genus Gracilaria and propose a new combination, G. babae, based on the anatomical observations and molecular data.