Hybridization can result in reproductively isolated and phenotypically distinct lineages that evolve as independent hybrid species. How frequently hybridization leads to speciation remains largely unknown. Here we examine the potential recurrence of hybrid speciation in the wild yeast Saccharomyces paradoxus in North America, which comprises two endemic lineages SpB and SpC, and an incipient hybrid species, SpC*. Using whole-genome sequences from more than 300 strains, we uncover the hybrid origin of another group, SpD, that emerged from hybridization between SpC* and one of its parental species, the widespread SpB. We show that SpD has the potential to evolve as a novel hybrid species, because it displays phenotypic novelties that include an intermediate transcriptome profile, and partial reproductive isolation with its most abundant sympatric parental species, SpB. Our findings show that repetitive cycles of divergence and hybridization quickly generate diversity and reproductive isolation, providing the raw material for speciation by hybridization.