A third species of Aatolana is described from material collected in baited traps deployed off the north east coast of Australia. This species can be distinguished from the other species in the genus principally by the morphology of the frontal lamina, coxa 7 and uropods, length of the antennae, and setation of pereopod 7 and the pleotelson. A key to the three species in the genus, an emended generic diagnosis and a discussion of the systematic position of the genus are also presented based on the examination of new material. This examination shows that, of the apomorphies which have been suggested to characterise species of Aatolana, only the enlarged and setose epimera of pleonite 3 can be recognised as a putative unique synapomorphy that unambiguously defines the genus. The morphology of the frontal lamina of the new species of Aatolana described here is also recognised as an additional character shared with species of Booralana Bruce, 1986, further suggesting a close relationship between species in these two genera.