In an investigation of Circinaria species in volcanic mountains of northeast China, one new species, C. laxilobata was identified based on morphological characteristics and DNA sequence data. The new species differs morphologically from other members of the C. contorta group by its greenish olive, thin thallus with dispersed areoles and elongated, diverging, branching marginal areoles distinctly delimited from the inner part, round apothecia with entire thalline margin, moniliform paraphyses, asci with 1–2 ellipsoid spores, and the absence of secondary metabolites. Comparisons of the ITS sequences of the nuclear ribosomal DNA repeat tandem, both in phylogenetic analyses and secondary structure models of ITS2, support the taxonomic distinctness of this species. The new species is described and illustrated in detail. A key to the species of Circinaria from China is also provided.