Examination of genetic and ecological relationships within sibling species complexes can provide insights into species diversity and speciation processes. Alpheus angulatus and A. armillatus, two snapping shrimp species with overlapping ranges in the north-western Atlantic, are similar in morphology, exploit similar ecological niches and appear to represent recently diverged sibling species. We examined phylogenetic and ecological relationships between these two species with: (i) sequence data from two mitochondrial genes (16S rRNA and COI); (ii) data on potential differences in microhabitat distribution for A. armillatus and A. angulatus; and (iii) data from laboratory experiments on the level of reproductive isolation between the two species. DNA sequence data suggest A. armillatus and A. angulatus are sister species that diverged subsequent to the close of the Isthmus of Panama, and that haplotype diversity is lower in A. armillatus than in A. angulatus. Both species are distantly related to A. heterochaelis and A. estuariensis, two species with which A. angulatus shares some similarities in coloration. Ecological data on the distribution of A. angulatus and A. armillatus from two locations revealed differences in distribution of the two species between habitat patches, with each patch dominated by one or the other species. However, there was no apparent difference in distribution of the two species within habitat patches with respect to microhabitat location. Ecological data also revealed that heterospecific individuals often occur in close proximity (i.e. within metres or centimetres) where sympatric. Behavioural data indicated that these species are reproductively isolated, which is consistent with speciation in transient allopatry followed by post-divergence secondary contact. Our data further resolve taxonomic confusion between the sibling species, A. armillatus and A. angulatus, and suggest that sympatry in areas of range overlap and exploitation of similar ecological niches by these two recently diverged species have selected for high levels of behavioural incompatibility.