We used molecular approaches to study the status of speciation in coral reef fishes known as hamlets (Serranidae: Hypoplectrus). Several hamlet morphospecies coexist on Caribbean reefs, and mate assortatively with respect to their strikingly distinct colour patterns. We provide evidence that, genetically, the hamlets display characteristics common in species flocks on land and in freshwaters. Substitutions within two mitochondrial DNA (mtDNA) protein-coding genes place hamlets within a monophyletic group relative to members of two related genera (Serranus and Diplectrum), and establish that the hamlet radiation must have been very recent. mtDNA distances separating hamlet morphospecies were slight (0.6 ± 0.04%), yielding a coalescent estimate for the age of the hamlet flock of approximately 430 000 years. Morphospecies did not sort into distinct mtDNA haplotype phylogroups, and alleles at five hypervariable microsatellite loci were shared broadly across species boundaries. None the less, molecular variation was not distributed at random. Analyses of mtDNA haplotype frequencies and nested clades in haplotype networks revealed significant genetic differences between geographical regions and among colour morphospecies. We also observed significant microsatellite differentiation between geographical regions and in Puerto Rico, among colour morphospecies; the latter providing evidence for reproductive isolation between colour morphospecies at this locale. In our Panama collection, however, colour morphospecies were mostly genetically indistinguishable. This mosaic pattern of DNA differentiation implies a complex interaction between population history, mating behaviour and geography and suggests that porous boundaries separate species in this flock of brilliantly coloured coral reef fishes.