The genus Linum consists of over 180 species, the most famous being L. usitatissimum, the source of linen and linseed oil. The eight genera of Linaceae subf. Linoideae, of which Linum is the largest, exhibit a complex biogeographic distribution, inhabiting all continents except Antarctica. Numerous species in Linoideae are heterostylous, but the ancestral breeding system of the group has not been determined. We present phylogenetic analyses of 44 species representing all eight genera of subf. Linoideae and 37 species of Linum, with data from the chloroplast (ndhF, trnL-F, trnK 3′ intron) and the nuclear ITS, with Hugonia (Linaceae subf. Hugonioideae) as outgroup. Sequences of rbcL from 48 species of Linaceae, including five species from Hugonioideae and seven species from other families of Malpighiales, were analyzed independently. Our results suggest that Linaceae and subf. Linoideae are monophyletic, but Linum is not. Anisadenia, Reinwardtia, and Tirpitzia are found to be the basal members of Linoideae. The rest of the subfamily forms two major lineages: a blue-flowered clade (Linum sections Linum and Dasylinum) and a yellow-flowered clade (Linum sects. Linopsis, Syllinum, and Cathartolinum, and the genera Cliococca, Hesperolinon, Radiola, and Sclerolinon). Diversification of Linoideae may have begun 46–51 mya, probably in Southeast Asia. Linum appears to have arisen in Eurasia, from which it spread to Africa, North America, South America, and Australasia. Our analyses indicate that neither heterostyly nor homostyly can yet be confirmed as the ancestral state in Linoideae or Linaceae, but provide strong evidence that breeding system is evolutionarily labile in this group.