Costesia spongiosa is known only from central Chile. The recent discovery of several small populations prompted an examination of diagnostic morphological features and the sampling of DNA for surveying the chloroplast genome for a 71-kb inversion diagnostic of the Funariales and Encalyptales, and for reconstructing the phylogenetic affinities of this monospecific genus. The species is fully illustrated and mapped. The affinities of Costesia to the Gigaspermaceae are here confirmed based on morphology and corroborated by chloroplast sequence data. Molecular data suggest that Costesia is most closely related to Oedipodiella and Chamaebryum. Although the species is locally common, it has disappeared from several localities and seems now confined mostly to a protected area. We propose that Costesia spongiosa be included as the first Chilean endemic bryophyte in the IUCN Red List of Threatened Species.