To answer your primary question, the /^$species_filter/ match is failing because the $species_filter does not come at the beginning of the string. Remove the caret to match correctly.

for the string:

'AF035737 Homo sapiens general transcription factor 2-I (GTF2I) mRNA, 
+complete.'

/Homo sapiens/  will match
/^Homo sapiens/ will not
[download]

However there are many other things wrong with this routine. Here's a few comments.

---

sub filter_by_Species()
# Don't use prototypes unless you NEED them. And even then, you probab
+ly don't.


open( NEWALIGN, "<blast_files/$newBlastFile") || die "$!";
#use lexical filehandles and three argument opens to prevent
# obscure bugs. The || is very high precedent. Not wrong
# really, but unecessarily powerful.

#read results file one line at a time
my @resultLine = <NEWALIGN>;
# Arggh. Read entire file into an array at once.

my @subjects = [];  # reference to empty array
# nope. Array whose first element is a reference to an empty array

#so I produce a hash with key = >gi line of report and value = all lin
+es after until next >gi
# I saw no "greater than" in the example data...

for (my $i = 0 ; $i<scalar @resultLine; $i++)
# C style loops. Avoid unless necessary. They work ok but 
# clutter up the script and make it harder figure out what 
# you are doing.

    if ($resultLine[$i] =~ /^>/)
# again, no "greater than" in the example data...

    {
        $current_subject = $resultLine[ $i ];
        chomp ($current_subject);
        push (@subjects, $current_subject);
        $alignment->{$current_subject} = "";
        $alignment->{$current_subject}.$resultLine[ $i ];
}
# you never use the %$alignment hash anywhere so why bother? 

my @elements;
my $boolean;
# declare variables in the smallest scope possible

foreach my $z (@subjects)
{
    chomp $z;
# already chomped in previous loop

    show_Output($boolean, $z, @elements);
# boolean ALWAYS equal 0. Why not just pass 0?
[download]

---

If I were to write this getting the same functionality it would look something like:

---

sub filter_by_Species
{

print 'New Blast File Opened<BR>';

open(my $newalign, '<', "blast_files/$newBlastFile") or die $!;

print 'Filtering Data........Please wait<P>';

my @subjects;

while <$newalign>
{    
    push @subjects, $_ if (/^>gi/)
}


print '<TABLE BORDER=2>';
print '<th align=center><B>Status</B></th>';
print '<th align=center><B>Information on new hits</B></th>';

for (@subjects)
{
    chomp;
    my @elements = split '\|';
    if($elements[-1] =~ /$species_filter/)
    {
        print "<TR><TD>Match to $species_filter";
        show_Output(0, $_, @elements);
    }
}

print'</TABLE><BR><BR>';
}
[download]

---

Also, since your show_Output used blank prototypes, it never recieves the passed values. Again, don't use prototypes unless you NEED to. Never mind that last bit, that is not true.

Update: fixed a few typos.