The Melanotaenia pygmaea is recorded to be found in a freshwater environment within a benthopelagic depth range.

[2] The Melanotaenia pygmaea is known to reach the maximum recorded length of about 5.5 centimeters or about 2.1 inches as an unsexed male.

[2] The Melanotaenia pygmaea is native to the areas of Prince Regent River, West Kimberley district, and northwestern Australia.

This species stays in areas that have rocky bottoms and that lack vegetation in the water.

[4] The diet of this species is unknown, but it is assumed that they feed on small insects and vegetation such as algae.