The new species described herein has been segregated from the complexes surrounding T. rosea Benth. and T. brachyodon Domin, both of which are extremely challenging taxonomically. Tephrosia sabulosa R.Butcher is distinctive; however, its relationship with the other members of these complexes is not yet known. It occurs in sandhill habitats on the crests and slopes of dunes and has a disjunct distribution in Australia, with all but one collection being made from the Simpson-Strzelecki Dunefields bioregion of the Northern Territory, South Australia and Queensland; nearly 900 km lies between these collections and that made from the Kiwirrkurra Indigenous Protected Area (Gibson Desert bioregion) in Western Australia. The new species is described and differentiated from similar taxa, and images and a distribution map are provided.