We examined phylogenetic relationships among Daphnia using mitochondrial DNA (mtDNA) sequences from the small subunit ribosomal RNA (12S), cytochrome c oxidase subunit I and nuclear DNA sequences from the first and second internal transcribed spacer representing 1612 base positions. Phylogenetic analyses using several species of the three main Daphnia subgenera, Ctenodaphnia, Hyalodaphnia and Daphnia, revealed that the Hyalodaphnia are a monophyletic sister group of the Daphnia. Most Hyalodaphnia species occur on one continent, whereas only three are found in North America and Europe. Endemicity of species is associated with variation in thermal tolerance and habitat differentiation. Although many species of the Hyalodaphnia are known to hybridize in nature, mtDNA divergence is relatively high ca. 9%) compared to other hybridizing arthropods (ca. 3%). Reproductive isolation in Daphnia seems to evolve significantly slower than genetic isolation. We related these findings to what is known about the ecology and genetics of Daphnia in order to better understand the evolutionary diversification of lineages. The relationship of these data to phylogenetic patterns is discussed in the context of speciation processes in Daphnia.