During a recent expedition of the Eurasian Dry Grassland Group in the steppes of southern Ukraine, we discovered on sand dunes a new sterile crustose aspicilioid lichen with rhizomorphs. It is described here as new to science under the name Circinaria ucrainica (Megasporaceae). The new combination Circinaria reptans (Looman) Khodos. & Darmostuk is also proposed. Circinaria ucrainica is characterized by small grey areoles with a net of dark grey to brownish spicate prothalline tips and pale rhizomorphs. According to the phylogenetic analysis, the new species is closely related to the terricolous Circinaria reptans, but the latter has thicker rhizomorphs of 200–400 μm diameter, finely developed areoles and lacks spicate prothalline tips. Furthermore, we discuss the differences between the new species and other morphologically similar species with rhizomorphs, such as Aspicilia spicata, Circinaria crespiana and C. reptans. The ecological characters of soil and vegetation, including vascular plants, bryophytes and lichens, are provided for the habitat of C. ucrainica.