The neglected false truffle species Hydnotrya bailii Soehner (Ascomycetes, Discinaceae) is re-described and separated from its sister taxon Hydnotrya tulasnei by morphological and phylogenetic analyses based on internal transcribed spacer rDNA sequences. The most distinct morphological and ecological characters are small globose, rather than kidney-like, ascomata as known from the sister taxon H. tulasnei, strictly monoseriate ascospores and montane habitats. Phylogenetic analyses resulted in two clearly separated clusters that revealed the ectomycorrhizal specificity of H. bailii to Picea abies and that H. tulasnei is preferably associated to Fagus sylvatica. We also show that H. bailii was already present in mycorrhizal samples but until now could not be correctly assigned. Our analyses also indicate cryptic diversity within H. cerebriformis and other, morphologically not yet characterized, Hydnotrya groups. An emended determination key for all Hydnotrya species known from Central Europe is provided.