The systematics of tropical and subtropical western Atlantic species of Iotrochota is re-examined in light of the discovery of an undescribed species. Iotrochota birotulata (Higgin), the type species, is found to have more characters than previously recognised and is redefined with emphasis on a skeleton of spongin fibres containing stout, curved styles and strongyles (category I) and an interstitial spiculation consisting mainly of longer, slender and straight styles (II). Iotrochota bistylata Boury-Esnault is confirmed as a synonym of the above. The new species, named I. arenosa, sp. nov., differs in external morphology, strong mucus development, incorporation of sand and interstitial spicules that are mainly long, straight strongyles. Iotrochota atra (Whitfield), thought to be a synonym of I. birotulata, is recognised as a separate species occurring exclusively in the Bahamas and is found to be a senior synonym of I. imminuta Pulitzer-Finali; it is morphologically very similar to I. birotulata, but lacks birotulae and has a strongly reduced skeleton of megascleres (mostly one category of delicate strongyles). Iotrochota agglomerata Lehnert & van Soest is recognised as the fourth distinct species for its unusual colour (orange), thinly encrusting habit and special spiculation (styles with tylostylote modifications).