The freshwater red algal genus Batrachospermum has been shown to be paraphyletic since the first molecular studies of the Batrachospermales. Previous research, along with this study, provides strong support for the clade Batrachospermum section Helminthoidea. This study has found that heterocortication, the presence of both cylindrical and bulbous cells on the main axis, is an underlying synapomorphy of this clade. Based on support from DNA sequences of the rbcL gene, the COI barcode region and the rDNA ITS 1 and 2, along with morphological studies, the new genus Sheathia is proposed. Seven heterocorticate species were recognized from the molecular clades. Sheathia boryana and S. exigua sp. nov. appear to be restricted to Europe, whereas S. confusa occurs in Europe and New Zealand. Sheathia involuta is widespread in the USA and reported for the first time from Europe. Sheathia americana sp. nov., has been collected in the USA and Canada, and S. heterocortica and S. grandis sp. nov. have been collected only in the USA. Sheathia confusa and S. grandis can be distinguished based on morphological characters, whereas DNA sequence data are required to conclusively distinguish the other species. Sheathia fluitans and S. carpoinvolucra also are placed within this genus based on the presence of heterocortication. These data also hint at greater diversity among non-heterocorticate Sheathia than is recognized by the single species name S. arcuata.