The tussock moth genus Leptocneria Butler, 1886 (Lepidoptera: Erebidae: Lymantriinae) has been considered an entirely Australian taxon that includes two species: L. reducta (Walker, 1855) and L. binotata Butler, 1886. However, we discovered a divergent lineage of Leptocneria inhabiting Flores Island, Lesser Sundas, Indonesia. Here, we describe this lineage as the third species of the genus, L. vinarskii Bolotov, Kondakov et Spitsyn sp. nov. The new species is sister to L. reducta but differs from it by dark gray marking patterns of the forewing that lack orange or dark yellow marks. The mean COI genetic distance between L. vinarskii sp. nov. and L. reducta sensu lato is 2.9%. Our findings confirm that the Wallacean region was a faunal exchange area between Sundaland and Sahul during the Pleistocene but highlight that the vicariance events may have played a crucial role in origin of the endemic faunas on the islands of East Nusa Tenggara. Additionally, we show that both Australian species most likely represent cryptic species complexes, which are in need of further taxonomic revision.