At just 50,000 times the mass of the Sun, it is more than two times smaller than any other known object of its kind.
It's a full 100,000 times less massive than the largest black holes at the heart of other galaxies.
"In a sense, it's a teeny supermassive black hole," said Elena Gallo, assistant professor of astronomy in the University of Michigan College of Literature, Science, and the Arts.
Black holes come in two types. The "stellar mass" variety have the mass of several Suns. They form when the largest stars die and collapse.
Every large galaxy, including our own Milky Way, is believed to have a supermassive black hole at its core.
The recently discovered object is one of the first to be identified in a dwarf galaxy.
The findings illuminate for astronomers important similarities between galaxies of vastly different scales. And because the dwarf galaxy, called RGG 118, is so small, it's unlikely that it has ever merged with other galaxies, so it gives researchers a window to a younger universe. Larger galaxies are thought to have grown through mergers.
"For galaxies like our Milky Way, we don't know what it was like in its youth.
"By studying how galaxies like this one are growing and feeding their black holes and how the two are influencing each other, we could gain a better understanding of how galaxies were forming in the early universe," said Baldassare.
"The black hole we found is active and based on the X-ray observations, it appears to be is consuming material at a rate similar to active black holes in much more massive galaxies," Baldassare said.
Researchers figured out the mass of the black hole by studying the motion of the gas near the centre of the galaxy using visible light data from the Clay Telescope.
They used the Chandra data to figure out the brightness of material around the black hole in the X-ray band.
The X-ray luminosity tells astronomers the rate at which the black hole is taking in matter. RGG 118 is consuming material at one per cent the maximum rate, which matches the properties of other supermassive black holes.
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