Most reconstructions of basal land plant relationships derived from morphological or molecular data suggest that the Sphagnopsida form a critical clade at or near the base of the mosses (Bryophyta s.s.). The Sphagnopsida include two orders: Sphagnales and Ambuchananiales, each with one family. The Ambuchananiaceae is monotypic, with A. leucobryoides of Tasmania. Nucleotide sequences from five genomic regions, two from the nuclear genome (ITS and 26S nuclear ribosomal DNA) and three from the chloroplast genome (psbT, rpl16, trnL) were subjected to cladistic analyses in order to assess 1) the relationship between Ambuchanania and Sphagnum, 2) the polarity of evolutionary change in Sphagnum (i.e., infer a root for the infrageneric phylogeny), 3) monophyly of the four large sections of Sphagnum (Acutifolia, Cuspidata, Sphagnum, and Subsecunda) and 4) phylogenetic relationships of the smaller or monotypic sections. Ambuchanania is resolved as the sister group to Sphagnum and is not nested within the latter as a highly derived species. Polarity of evolutionary change in Sphagnum is ambiguous; alternative hypotheses suggested by molecular data place either the sect. Subsecunda or the sect. Sphagnum as sister to all other species. The four large sections of Sphagnum are each monophyletic if circumscribed to include species traditionally placed in monotypic sections. Sphagnum macrophyllum (sect. Isocladus), is nested within the Subsecunda. Sphagnum pylaesii (sect. Hemitheca), is nested within the Cuspidata and is closely related to S. tenellum (sect. Mollusca). Sphagnum wulfianum (sect. Polyclada), is nested within the Acutifolia, closely related to S. fimbriatum and S. girgensohnii. Sphagnum aongstroemii (sect. Insulosa) is either nested within the Acutifolia, or is sister to other species of Acutifolia. Molecular evidence supports a sister group relationship between the sections Rigida and Sphagnum, and between the sections Squarrosa and Acutifolia. Molecular data suggest that phylogenetic structure in Sphagnum can be accommodated by four large sections without segregating morphologically distinctive taxa into smaller sections, as is traditionally done. A revised classification is proposed in which the genus is divided into four sections: Acutifolia, Cuspidata, Sphagnum, and Subsecunda.