The species of the genus Psathyrella, listed by Kühner & Romagnesi (1953: 357) in the groups Graciles and Microrrhizae, but excluding P. ammophila, are described and brought into one section, Psathyrella section Psathyrella emend. Kits van Wav. Four new species, belonging to this section are described, P. connata, P. melanophylloides, P. ridicula, and P. melanophylla [= Drosophila caudata sensu Kühn. & Romagn.]. Drosophila stellata var. orbicularis Romagn. is raised to specific level. Type material of D. ochracea Romagn., D. opaca Romagn., D. stellata Romagn., D. stellata var. orbicularis Romagn., and Psathyrella longicauda P. Karst. has been examined. It is argued that when it comes to a choice between spore size and shape of basidia on the one hand, and the degree of development of the veil on the other hand as leading characters in subdividing the genus Psathyrella into subgenera, spore size and shape of basidia are to be preferred because this directly leads to establishing the subgenus Psathyrella as a very natural group. The degree of development of the veil as key character leads to an undesirable spreading of closely related species over several subdivisions.