Allopatry and allopatric speciation can arise through two different mechanisms: vicariance or colonization through dispersal. Distinguishing between these different allopatric mechanisms is difficult and one of the major challenges in biogeographical research. Here, we address whether allopatric isolation in an endemic island lizard is the result of vicariance or dispersal. We estimated the amount and direction of gene flow during the divergence of isolated islet populations and subspecies of the endemic Skyros wall lizard Podarcis gaigeae, a phenotypically variable species that inhabits a major island and small islets in the Greek archipelago. We applied isolation-with-migration models to estimate population divergence times, population sizes and gene flow between islet–mainland population pairs. Divergence times were significantly correlated with independently estimated geological divergence times. This correlation strongly supports a vicariance scenario where islet populations have sequentially become isolated from the major island. We did not find evidence for significant gene flow within P. g. gaigeae. However, gene-flow estimates from the islet to the mainland populations were positively affected by islet area and negatively by distance between the islet and mainland. We also found evidence for gene flow from one subspecies (P. g. weigandi) into another (P. g. gaigeae), but not in the other direction. Ongoing gene flow between the subspecies suggests that even in this geographically allopatric scenario with the sea posing a strong barrier to dispersal, divergence with some gene flow is still feasible.