A novel herpesvirus infection in nine Bourke's parrots (Neopsephotus bourkii, formerly Neophema bourkii) housed in an outdoor aviary comprised of multiple species of birds was diagnosed based on histopathology, electron microscopy and polymerase chain reaction (PCR). Clinical signs in the parrots included anorexia, ruffled feathers, depression, loss of weight and respiratory distress. The most common gross lesions were moderately congested and oedematous lungs and a mild fibrinous exudate in the air sacs and lumen of the trachea. Histological examination revealed mild to severe bronchopneumonia and airsacculitis with syncytial cells containing eosinophilic intranuclear inclusion bodies in most birds. Other less frequent changes included tracheitis, syringitis, sinusitis, rhinitis, otitis media and conjunctivitis. Attempts to culture the virus in chicken embryos and chicken embryo liver cells were unsuccessful. Examination by transmission electron microscopy of syncytial cells from the lungs of two birds revealed intranuclear virus particles typical of the family Herpesviridae. DNA from a novel herpesvirus was amplified from lung tissue by PCR using degenerate primers derived from conserved avian herpesvirus sequences. The virus belongs in the genus Iltovirus of the Alphaherpesvirinae subfamily. It is not closely related to Psittacid herpesvirus 1 that causes Pacheco's disease but does group phylogenetically with a clade of herpesviruses that cause respiratory disease in a number of avian species. The proposed name for this herpesvirus is Psittacid herpesvirus 3.