A HOLE-IN-THE-WALL canteen in Hong Kong that offers dishes for less than $1.50 has become the world's cheapest Michelin-starred restaurant.

Tim Ho Wan, which means Add Good Luck, can seat only 20 people in its steamy dining room where battered bamboo baskets of dim sum sell for as little as $1.42.

A busy chef at Hong Kong's small and steamy Tim Ho Wan restaurant. Credit:AFP

In other Michelin-ranked restaurants a meal can cost more than $400.

Michelin guide director Jean-Luc Naret said it was the ''most affordable starred restaurant in the world''.