Mature females of the Paedocypris progenetica, a member of the carp family, grow to only 7.9mm and the males have enlarged pelvic fins and exceptionally large muscles that may be used to grasp the females during copulation, researchers wrote in the Proceedings of the Royal Society, published on Wednesday by the Royal Society in London.
Ralf Britz, a zoologist at the Natural History Museum in London, helped analyse the fish's skeleton.
He said: "This is one of the strangest fish that I've seen in my whole career. It's tiny, it lives in acid and it has these bizarre grasping fins. I hope we'll have time to find out more about them before their habitat disappears completely."
The previous record for small size, according to the Natural History Museum in London, was held by an 8mm species of Indo-Pacific goby.
The new fish was discovered on Sumatra island by Maurice Kottelat from Switzerland and Tan Heok Hui from the Raffles Museum of Biodiversity Research in Singapore.
The fish experts were working with colleagues from Indonesia and with Kai-Erik Witte from the Max Planck Institute in Germany.
Female Paedocypris progenetica
grow to only 7.9mm in length
According to the researchers, the fish live in dark, tea-coloured water with an acidity of pH3, at least 100 times more acidic than rainwater.
Swamps like this were once thought to harbour very few animals, but recent research has shown that they are highly diverse and home to many species that occur nowhere else.
Peat swamps are under threat in Indonesia from fires lit by plantation owners and farmers as well as unchecked development and farming. Several populations of Paedocypris have already been lost, researchers at the Natural History Museum say.