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The superfamily of kangaroos (Macropodoidea) is comprised of the subfamilies Propleopinae, Hypsiprymnodontinae, Paleopotoroinae, Potoroinae, Bulungamayinae, Balbarinae, Macropodinae, and Sthenurinae. Of these, Hypsiprymnodontinae, Potoroinae, and Macropodinae are extant. Competing phylogenetic hypotheses unite potoroines with either hypsiprymnodontines or macropodines, with most recent workers following a classificatory scheme that recognizes Hypsiprymnodontidae (hypsiprymnodontines) and Macropodidae (macropodines + potoroines). To address phylogenetic relationships among living macropodoids, we analyzed sequences from three mitochondrial genes (12S rRNA, tRNA valine, 16S rRNA) and one nuclear gene (protamine P1). MtDNA and protamine P1 both support a basal split of Hypsiprymnodon from other macropodoids rather than an association of Hypsiprymnodon with potoroines. This suggests that bipedal hopping and a complex stomach evolved once among macropodids. Monophyly of the Macropodinae is supported. Among macropodines, there is support for a Dorcopsis-Dorcopsulus association. Potoroine monophyly is less clear, although among potoroines there is support for an association of Bettongia and Aepyprymnus. Divergence times were estimated using 12S rRNA, tRNA-valine, and 16S rRNA transversions and suggest that kangaroos separated from a possum-like ancestor approximately 38-44 million years ago. Hypsiprymnodon diverged from other macropodoids approximately 34 to 38 million years ago. In agreement with the fossil record, the diversification of potoroines predates the diversification of macropodines. The latter have radiated in association with the development of a more arid climate and emergent grasslands over the Australian continent.