Palatogobius grandoculus is described based on two specimens taken from a depth of 256–276 m off Cozumel, Mexico, in the Western Caribbean. It differs from the only other described species in the genus, Palatogobius paradoxus, by having a much larger eye, shorter snout, and narrower interorbital width. Body scales extend forward on sides past the first dorsal fin origin, whereas in P. paradoxus they extend forward only to beneath the soft dorsal fin. Palatogobius grandoculus has 21 pectoral fin rays, whereas there are 18–20 (usually 19) in P. paradoxus. Vomerine teeth are absent in P. grandoculus.