Fungi are the principal degraders of biomass in terrestrial ecosystems and establish important interactions with plants and animals. However, our current understanding of fungal evolutionary diversity is incomplete and is based upon species amenable to growth in culture. These culturable fungi are typically yeast or filamentous forms, bound by a rigid cell wall rich in chitin. Evolution of this body plan was thought critical for the success of the Fungi, enabling them to adapt to heterogeneous habitats and live by osmotrophy: extracellular digestion followed by nutrient uptake. Here we investigate the ecology and cell biology of a previously undescribed and highly diverse form of eukaryotic life that branches with the Fungi, using environmental DNA analyses combined with fluorescent detection via DNA probes. This clade is present in numerous ecosystems including soil, freshwater and aquatic sediments. Phylogenetic analyses using multiple ribosomal RNA genes place this clade with Rozella, the putative primary branch of the fungal kingdom. Tyramide signal amplification coupled with group-specific fluorescence in situ hybridization reveals that the target cells are small eukaryotes of 3-5 μm in length, capable of forming a microtubule-based flagellum. Co-staining with cell wall markers demonstrates that representatives from the clade do not produce a chitin-rich cell wall during any of the life cycle stages observed and therefore do not conform to the standard fungal body plan. We name this highly diverse clade the cryptomycota in anticipation of formal classification.