We present the discovery of a new dwarf galaxy , Hydra II , found serendipitously within the data from the ongoing Survey of the Ma gellanic Stellar History ( SMASH ) conducted with the Dark Energy Camera on the Blanco 4m Telescope . The new satellite is compact ( r _ { h } = 68 \pm 11 { pc } ) and faint ( M _ { V } = -4.8 \pm 0.3 ) , but well within the realm of dwarf galaxies . The stellar distribution of Hydra II in the color-magnitude diagram is well-described by a metal-poor ( { [ Fe / H ] } = -2.2 ) and old ( 13 Gyr ) isochrone and shows a distinct blue horizontal branch , some possible red clump stars , and faint stars that are suggestive of blue stragglers . At a heliocentric distance of 134 \pm 10 { kpc } , Hydra II is located in a region of the Galactic halo that models have suggested may host material from the leading arm of the Magellanic Stream . A comparison with N-body simulations hints that the new dwarf galaxy could be or could have been a satellite of the Magellanic Clouds .