The moon, designated S/2004 N 1, is estimated to be no more than 19 km across, making it the smallest known moon in the Neptunian system, NASA said in a statement.
It is so small and dim that it is roughly 100 million times fainter than the faintest star that can be seen with the naked eye, and it even escaped detection by NASA's Voyager 2 spacecraft, which flew past Neptune in 1989 and surveyed the planet's system of moons and rings, the space agency said.
Mark Showalter of the US non-profit science research group SETI Institute found the moon July 1 while studying the faint arcs, or segments of rings, around Neptune.
"The moons and arcs orbit very quickly, so we had to devise a way to follow their motion in order to bring out the details of the system," Showalter said.
"It's the same reason a sports photographer tracks a running athlete, the athlete stays in focus, but the background blurs."
The method involved tracking the movement of a white dot that appears over and over in more than 150 archival Neptune photographs taken by Hubble from 2004 to 2009.
Showalter noticed the white dot about one million km from Neptune located between the orbits of the Neptunian moons Larissa and Proteus.
He plotted a circular orbit for the moon, which completes one revolution around Neptune every 23 hours, NASA said.