The creature, Majungatholus atopus, was a two-legged predator almost 20ft long and a distant cousin of Tyrannosaurus rex. It lived near the end of the dinosaurs' reign, 65 to 70 million years ago, on what is now the African island of Madagascar.
Majungatholus had a highly unusual bone structure and features researchers suspect were used to send visual signals to attract potential mates or threaten enemies. Its facial bones were rough and wrinkled, and it had a bony bump above each eye socket which was probably covered with a non- bony horn.
The discovery was reported in the journal Science Today by United States researchers.
A team led by Professor David Krause, from the State University of New York at Stony Brook, found Majungatholus's remains about 25 miles from Mahajanga, one of Madagascar's largest cities. Initially, they were disappointed only to find sections of tail. But then they discovered pieces of the skull which form an almost whole head.
Professor Krause, who plans to return to Madagascar in June, said: "This was the most terrific find I have been associated with in more than 25 years' field work."
Majungatholus appeared to have been buried during a flood soon after its death, protecting its remains from scavengers and decomposition.
Scientists are excited by the animal's strong resemblance to a horned two-legged dinosaur called Carnotaurus, known only in Argentina. Both belong to a family previously found only in India and South America. The find suggests the creatures lived before the continents broke up and drifted apart.