Species of the didelphid marsupial genus Thylamys, commonly known as fat-tailed mouse opossums, are broadly distributed in the open habitats of central and southern South America. In this report we examine species limits in the genus and infer phylogenetic relationships among Thylamys species using both molecular phylogenetic and morphological methods. We assessed species limits using a broad geographic sample of DNA sequences from the mitochondrial gene cytochrome b in conjunction with morphological character analysis, and we inferred phylogenetic relationships among species using the cytochrome-b dataset in addition to sequences from the mitochondrial genes cytochrome c oxidase subunit II and NADH dehydrogenase 2 for a representative subset of individuals. Based on the results of these analyses, we recognize Xerodelphys (new subgenus) for T. karimii and T. velutinus, and we recognize seven valid species in the nominotypical subgenus. The latter includes T. macrurus, T. pusillus, and two monophyletic species groups: the Elegans Group (T. elegans, T. pallidior, T. tatei) and the Venustus Group (T. sponsorius, T. venustus). Analysis of cytochrome-b sequences additionally reveals deep phylogeographic structuring in three species (T. pallidior, T. pusillus, T. venustus), each of which contains two or three robustly supported allopatric haplogroups. The existence of undescribed Peruvian forms of the Elegans Group is also plausibly indicated. We provide morphological diagnoses of all species recognized as valid in this report, summarize information about geographic distributions, comment on previous misidentifications, and briefly consider historical-biogeographic scenarios with a focus on dispersal events across the Andes.