Two species of palo santo trees are distributed in the Galápagos archipelago, the native Bursera graveolens and the endemic Bursera malacophylla (Burseraceae). However, a zone of individuals morphologically intermediate between the two exists on northern Santa Cruz Island and south-eastern Santiago Island, suggesting that they may not be reproductively isolated. Here we review the species' distributional and morphological differences and test for evidence of hybridization between the two species using DNA sequence and AFLP data. We find that the species lack distinguishing synapomorphies across the five nuclear and plastid regions examined. Population assignment tests and population genetic analyses of AFLP data indicate that genetically similar palo santo individuals (N = 87), including putative hybrids, partition into two genealogical groups that do not uniformly correspond to island- or taxon-based membership. Furthermore, genotypic admixture levels among morphologically intermediate individuals do not indicate widespread hybridization. Thus, we recommend recognizing the endemic palo santo taxon as B. graveolens subspecies malacophylla (B.L.Rob.) A. Weeks & Tye comb. & stat. nov. in light of its close genetic relationship to B. graveolens subsp. graveolens and its distinctive morphology and distribution. Future research should quantify phenotypic variation in palo santo populations as another means for understanding the basis of morphological differences between the subspecies. © 2009 The Linnean Society of London, Botanical Journal of the Linnean Society, 2009, 161, 396–410.