Among the earliest diverging animal phyla are the Cnidaria. Freshwater polyps of the genus Hydra (Cnidaria, Hydrozoa) have long been of general interest because different species of Hydra reveal fundamental principles that underlie development, differentiation, regeneration and also symbiosis. The phylogenetic relationships among the Hydra species most commonly used in current research are not resolved yet. Here we estimate the phylogenetic relations among eight scientifically important members of the genus Hydra with molecular data from two nuclear (18S rDNA, 28S rDNA) and two mitochondrial (16S rRNA, cytochrome oxidase subunit I (COI)) genes. The phylogenetic trees obtained by maximum parsimony (MP), maximum likelihood (ML) and Bayesian inference (BI) methods were generally compatible with present morphological classification patterns. However, the present analysis also bears on several long-standing questions about Hydra systematics and reveals some characteristics of the phylogenetic relationships of this genus that were unknown so far. It indicates that Hydra viridissima, the only species in Hydra, which contains symbiotic algae, might be considered as the sister group to all other species within this genus. Analyses of both nuclear and mitochondrial sequences support the view that Hydra oligactis and Hydra circumcincta are sisters to all other Hydra species. Unexpectedly, we also find that in contrast to its initial description, the strain used for making transgenic Hydra, Hydra vulgaris (strain AEP) is more closely related to Hydra carnea than to other species of Hydra.