Rhodoliths are nodular structures composed mainly of the superimposed thalli of calcareous red algae. Because their development is controlled by an array of ecological parameters, rhodoliths are a valuable source of palaeoenvironmental information. However, despite their common use in palaeoecological reconstructions, the stratigraphic significance of rhodolith accumulations seldom has been addressed in detail. In a study of Cenozoic rhodolith-bearing deposits from the North Island of New Zealand, rhodolithic units, usually of limited lateral extent, typically occur above major unconformities at the base of deepening upwards successions. Two types of transgressive rhodolith-bearing deposits may be distinguished on the basis of texture and rhodolith internal structure: (i) type A deposits are clast-supported rhodolithic rudstones containing abundant pebbles and cobbles reworked from the substrate, and are characterized by rhodoliths with a compact concentric to columnar internal structure and a high nucleus to algal cover ratio; (ii) type B deposits are rhodolithic floatstones with a matrix usually consisting of bryozoan fragments, benthic foraminifera and echinoid fragments or terrigenous silty fine sand. The rhodoliths of type B units usually have a loose internal framework with irregular to branched crusts. The two contrasting rhodolith-bearing units are interpreted as characteristic facies of transgressive systems tract deposits, analogous to shell concentrations formed under conditions of low net sedimentation. Type A deposits are correlated with relatively high-energy settings and/or narrow submerged palaeotopographic lows, whereas type B deposits are interpreted as forming in lower-energy settings. The association between transgression and development of rhodolithic facies is confirmed by observations of a modern rhodolith production site at Whangaparaoa Peninsula in North Island, where algal nodules grow above a ravinement surface cut during the Holocene sea-level rise, and also by a review of published fossil examples, many of which show stratigraphic and compositional attributes analogous to those of the New Zealand occurrences. The review indicates that transgressive rhodolith accumulations develop more commonly in, but are not restricted to, non-tropical settings. It is suggested that a combination of factors, such as low net sedimentary input, nature of the substrate, sea-level rise and inherited physiography contribute to determine the relationship between rhodolith-bearing deposits and transgressive settings.