Kogiids are known by two living species, the pygmy and dwarf sperm whale (Kogia breviceps and K. sima). Both are relatively rare, and as their names suggest, they are closely related to the sperm whale, all being characterized by the presence of a spermaceti organ. However, this organ is much reduced in kogiids and may have become functionally different. Here we describe a fossil kogiid from the late Miocene of Panama and we explore the evolutionary history of the group with special attention to this evolutionary reduction. The fossil consists of cranial material from the late Tortonian (~7.5 Ma) Piña facies of the Chagres Formation in Panama. Detailed comparison with other fossil and extant kogiids and the results of a phylogenetic analysis place the Panamanian kogiid, herein named Nanokogia isthmia gen. et sp. nov., as a taxon most closely related to Praekogia cedrosensis from the Messinian (~6 Ma) of Baja California and to Kogia spp. Furthermore our results show that reduction of the spermaceti organ has occurred iteratively in kogiids, once in Thalassocetus antwerpiensis in the early-middle Miocene, and more recently in Kogia spp. Additionally, we estimate the divergence between extant species of Kogia at around the late Pliocene, later than previously predicted by molecular estimates. Finally, comparison of Nanokogia with the coeval Scaphokogia cochlearis from Peru shows that these two species display a greater morphological disparity between them than that observed between the extant members of the group. We hypothesize that this reflects differences in feeding ecologies of the two species, with Nanokogia being more similar to extant Kogia. Nanokogia shows that kogiids have been part of the Neotropical marine mammal communities at least since the late Miocene, and gives us insight into the evolutionary history and origins of one of the rarest groups of living whales.