Symphurus insularis, a dwarf species of tonguefish reaching sizes to about 80 mm SL, is described based on 39 specimens collected in shallow-water habitats (3–23 m) at Madeira, the Canary Islands, and São Miguel, Azores. The new species is distinguished from its congeners by the combination of a 1-3-2 ID pattern, 12 caudal fin rays, 80–87 dorsal fin rays, 66–72 anal fin rays, 45–48 total vertebrae, 84–98 scales in a longitudinal series, unpigmented peritoneum, and ocular surface pigmentation featuring a yellowish to dark-brown background with a series of 3–8 mostly incomplete crossbands and usually 1–3 small, dark, spherical spots arranged in a longitudinal row along the body midline, together with a series of dark blotches alternating with unpigmented areas on the dorsal and anal fins, and a spot and dark band on the caudal fin base with the distal four-fifths of the caudal fin unpigmented. Symphurus insularis most closely resembles S. reticulatus from St. Helena, S. rhytisma from the Caribbean Sea and northern Brazil, and S. lubbocki from Ascension Island. Symphurus insularis is the only species of dwarf tonguefish known from shallow-water habitats in the Macaronesian biogeographic subprovince of the eastern Atlantic. Previous reports of other species of symphurine tonguefishes from shallow-water habitats in these areas were based on misidentifications. A key to species of Symphurus occurring in middle and eastern Atlantic waters is provided.