"We have this really amazing creature, sparrow sized, which lived essentially in the trees, showing us a very new, very interesting side of the evolutionary history of those animals," said Alexander W. A. Kellner of the National Museum of the Federal University of Rio de Janeiro, Brazil.
"We would never have thought of it," Kellner said in a telephone interview.
The find, by researchers led by Xiaolin Wang of the Chinese Academy of Science, is reported in this week's online edition of Proceedings of the National Academy of Sciences.
Pterodactyls are best known from giant examples of the ancient flying reptiles, and most specimens have been uncovered in coastal areas.
Dubbed Nemicolopterus crypticus - hidden flying forest dweller - the new fossil was uncovered in the western part of China's Liaoning province, a region that was forested when it lived there about 120 million years ago.
"We just had one side of the story of pterosaur evolution, Kellner said. "This is now providing us with information about pterosaurs that were living deep inside the continent."
"It's a new species. It's showing us a new chapter of the evolutionary history of those animals," Kellner went on.
Speaking at a news conference in Rio on Monday, Kellner said the find "opens a brand new chapter in the history of the evolution of these flying vertebrates."
The curved toes, he said, indicate that the pterosaurs lived most of the time in trees.
"Because they were flying animals, their fossils are extremely rare. So, discoveries such as this are fundamental to understand the evolution of these winged vertebrates," he said.
It was the smallest of its group of flying pterosaurs, he said, and when first uncovered the researchers thought it was a baby.
The skull was not fully fused, meaning it was not yet an adult, but the ends of the bones were developed, so it was not a hatchling either.
"How much could it grow? We have no idea," he said. "But even if it would double its size it would still be the smallest of its particular group."
The researchers said the legs and feet of Nemicolopterus had attachments for muscles indicating that it could grasp limbs, and unlike most pterodactyls, it lacked teeth. They speculated it might have eaten insects.
Matthew Carrano, a paleontologist at the Smithsonian's National Museum of Natural History, said some smaller specimens have been found but those were clearly younger than this animal.
"It is interesting to see some clear arboreal adaptations in this species," said Carrano, who was not on the research team. "It confirms a suspicion we had, that pterosaurs were more diverse in their habitats than we knew from the record."
"Once again, the Liaoning region is bringing out all sorts of new things," Carrano said.