Two new specimens of the aquatic sloth Thalassocnus from the Pliocene of Peru are described, one of T. carolomartini McDonald and Muizon, 2002 and the other T. yaucensis, sp. nov. Comparisons with the type species of Thalassocnus, T. natans, demonstrates that T. carolomartini and T. yaucensis are more similar morphologically to each other than to other species of the genus and are more derived. For example, both have a more elongated rostrum (premaxillae and mandibular spout) and more robust, quadrate to circular molariform teeth. The aquatic sloth Thalassocnus is sufficiently distinct morphologically that it is placed in a new subfamily, the Thalassocninae, and the Nothrotheriinae is raised to family rank. The morphological features shared by T. carolomartini and T. yaucensis indicate these species were better adapted to grazing on marine vegetation than earlier species of Thalassocnus. © 2004 by the Society of Vertebrate Paleontology.