Durikainema phascolarcti n. sp. (Nematoda: Muspiceoidea) is described from koalas Phascolarctos cinereus in coastal New South Wales, Australia. Adults were recovered from pulmonary arteries and arterioles, and larvae were observed in blood vessels and free in tissues of lung, cerebellum, medulla oblongata, liver, kidney, uterus, cervix and bladder. D. phascolarcti is distinguished from D. macropi, the only other member of the genus, by the minute size of the male (easily mistaken for a larva), the small size and simple shape of the spicule, the reduced number and exclusively post-anal position of the caudal papillae in the male, the shorter length of the larva and the presence of a large cuticular cephalic inflation in the larva, as occurs in adults. No reactions were observed in pulmonary arteries and medium-sized vessels containing adult D. phascolarcti. Nevertheless, some individual transverse sections of these pulmonary vessels contained as many as 135 sections of nematode occupying >95% of the diameter of the vessel. Such levels of infection in these important vessels probably compromise respiration and circulation, and affect the health of the animal.