Here are a couple of things you should know about the ‘New’ button in lookup window

  1. The button is visible only for ‘Account’ & ‘ Contact’ lookup relationship. It is not available for any other lookup relationship
  2. You can’t customize the layout that is displayed when you click on ‘New’ button from the lookup Window
  3. Account / Contact record created from the lookup window bypasses validation rules (i.e. validation rules are not enforced)
  4. Creating a ‘New’ contact from the lookup window does not associate it to any account (i.e. creates it as a private contact)

New Button on Lookup Window

It is probably be a good idea to hide this button from the lookup window. Navigate to Setup -> Customize -> User Interface and uncheck the option ‘Show Quick Create’

Hide new button in lookup window