Recent mtDNA phylogenies of Australasian agamid lizards are highly incongruent with existing morphological views. To resolve this discrepancy we sequenced two nuclear gene regions, c-mos and brain-derived neurotrophic factor (BDNF). These were highly concordant with each other and the mtDNA phylogeny, but not the morphology. A combined molecular analysis reveals substantial hidden support (additional phylogenetic signal that emerges only when the data sets interact in a combined analysis). Bayesian posteriors, and a partitioned bootstrap procedure introduced here, indicate strong support for most nodes. The resultant tree implies extensive morphological homoplasy, with many genera emerging as non-monophyletic (Amphibolurus, Rankinia, Ctenophorus, Physignathus, Diporiphora). The water and forest dragons (Physignathus and Hypsilurus) form a paraphyletic basal assemblage to the more derived Australian forms such as Amphibolurus and Ctenophorus, which include almost all the xeric taxa. However, the thorny devil Moloch horridus is a basal lineage and not closely related to the other arid forms. Tree topology, inferred divergence dates, palaeogeographical and palaeoclimatic data are all consistent with Miocene immigration into Australia from the north by mesic forest ecomorphs, followed by initial diversification in mesic habitats before radiation into xeric habitats facilitated by increasing aridity. © 2008 The Linnean Society of London, Biological Journal of the Linnean Society, 2008, 93, 343–358.