The swiftlets (genera Aerodramus, Collocalia and Hydrochous) are unusual among birds in that many species can orientate in complete darkness using echolocation. The position of the Papuan Swiftlet Aerodramus papuensis in this group has been uncertain historically, in part due to morphological differences between it and other swiftlets (it has three toes instead of the usual four) and a lack of data on its behaviour (there is uncertainty about whether it echolocates). Here we investigate the phylogenetic affinities of the Papuan Swiftlet using DNA sequence data from two mitochondrial genes, cytochrome b and ND2. We present evidence that it is able to echolocate but, unlike previously studied species that use echolocation primarily while flying in caves, A. papuensis uses this ability while active outside caves at night. We also provide new evidence for placement of the monotypic Waterfall Swiftlet Hydrochous gigas, a species that does not echolocate. Our data provide strong support for a basal relationship between A. papuensis and other Aerodramus taxa and suggest that this species and H. gigas are sister taxa, a relationship that would indicate paraphyly of the genus Aerodramus. Our phylogeny provides new insights into how echolocation has evolved in the swiftlets, in particular by indicating higher levels of homoplasy in this trait than was previously thought.