Crassulacean acid metabolism (CAM) is a photosynthetic pathway that significantly increases water use efficiency in plants. It has been proposed that CAM photosynthesis, which evolved from the ancestral C3 pathway, has played a role in the diversification of some prominent plant groups because it may have allowed them to colonize and successfully spread into arid or semi-arid environments. However, the hypothesis that CAM photosynthesis constitutes an evolutionary key innovation, thereby enhancing diversification rates of the clades possessing it, has not been evaluated quantitatively. We tested whether CAM photosynthesis is a key innovation in the Bromeliaceae, a large and highly diversified plant family that has successfully colonized arid environments. We identified five pairs of sister groups with and without the CAM feature, including 31 genera and over 2000 species. In all five cases, the clades with CAM photosynthesis were more diverse than their C3 counterparts. We provide quantitative evidence that the evolution of CAM photosynthesis is significantly associated with increased diversification in Bromeliaceae and thus constitutes an evolutionary key innovation. We also found preliminary evidence of an association between the CAM pathway and growth habit in bromeliads, with terrestrial species being more likely to show CAM photosynthesis than epiphytic species. To our knowledge, this is the first case of a physiological attribute shown to be a key innovation in plants. © 2011 The Linnean Society of London, Biological Journal of the Linnean Society, 2011, 104, 480–486.