Establishing the phylogenetic and demographic history of rare plants improves our understanding of mechanisms that have led to their origin and can lead to valuable insights that inform conservation decisions. The Atlantic coastal plain of eastern North America harbours many rare and endemic species, yet their evolution is poorly understood. We investigate the rare Sandhills lily (Lilium pyrophilum), which is endemic to seepage slopes in a restricted area of the Atlantic coastal plain of eastern North America. Using phylogenetic evidence from chloroplast, nuclear internal transcribed spacer and two low-copy nuclear genes, we establish a close relationship between L. pyrophilum and the widespread Turk’s cap lily, L. superbum. Isolation-with-migration and coalescent simulation analyses suggest that (i) the divergence between these two species falls in the late Pleistocene or Holocene and almost certainly post-dates the establishment of the edaphic conditions to which L. pyrophilum is presently restricted, (ii) vicariance is responsible for the present range disjunction between the two species, and that subsequent gene flow has been asymmetrical and (iii) L. pyrophilum harbours substantial genetic diversity in spite of its present rarity. This system provides an example of the role of edaphic specialization and climate change in promoting diversification in the Atlantic coastal plain.