The moon, designated S/2004 N 1, is estimated to be no more than 12 miles across, making it the smallest known moon in the Neptunian system.
It is so small and dim it even escaped detection by NASA's Voyager 2 spacecraft, which flew past Neptune in 1989 and surveyed the planet's moons and rings.
Mark Showalter of the SETI Institute found the moon July 1 while studying the planet's faint segments of rings, or arcs.
"The moons and arcs orbit very quickly, so we had to devise a way to follow their motion in order to bring out the details of the system," Showalter said. "It's the same reason a sports photographer tracks a running athlete -- the athlete stays in focus, but the background blurs."
Showalter tracked the movement of a white dot that appears in more than 150 Neptune photographs taken by Hubble from 2004 to 2009.
On a whim, Showalter looked beyond the ring segments and noticed the white dot about 65,400 miles from Neptune, located between the orbits of the Neptunian moons Larissa and Proteus. Showalter plotted a circular orbit for the moon, which completes one revolution around Neptune every 23 hours.