Sphagnum macrophyllum, S. pylaesii, and S. cyclophyllum are morphologically atypical in the genus Sphagnum and their systematic placement has been a source of controversy. The first is generally classified in the mono-specific section Isocladus, and the second as section Hemitheca. Sphagnum cyclophyllum is classified in the section Subsecunda, but several authors have hypothesized a close relationship between all three species. Nucleotide sequences from eight nuclear and chloroplast loci were obtained to test hypotheses about relationships among these taxa. Phylogenetic analyses resolve these species (along with S. microcarpum, closely related to S. cyclophyllum) in a well-supported monophyletic group within the section Subsecunda. Sphagnum macrophyllum is sister to S. cyclophyllum, S. microcarpum, and S. pylaesii. Sphagnum cyclophyllum and S. microcarpum form a clade that is sister to S. pylaesii. Two mutually monophyletic groups of populations are resolved within S. pylaesii, one including the European populations and the other including populations from eastern North America and South America. The European populations are almost identical at the nucleotide sequence level whereas the American populations are genetically diverse. Short, delicate pseudopodia; exceptionally large opercula; and an absence or near absence of pseudostomata appear to be synapomorphies for the clade containing S. macrophyllum, S. microcarpum, S. cyclophyllum, and S. pylaesii.