Understanding the relative influence of various abiotic and biotic variables on diversification dynamics is a major goal of macroevolutionary studies. Recently, phylogenetic approaches have been developed that make it possible to estimate the role of various environmental variables on diversification using time-calibrated species trees, paleoenvironmental data, and maximum-likelihood techniques. These approaches have been effectively employed to estimate how speciation and extinction rates vary with key abiotic variables, such as temperature and sea level, and we can anticipate that they will be increasingly used in the future. Here we compile a series of biotic and abiotic paleodatasets that can be used as explanatory variables in these models and use simulations to assess the statistical properties of the approach when applied to these paleodatasets. We demonstrate that environment-dependent models perform well in recovering environment-dependent speciation and extinction parameters, as well as in correctly identifying the simulated environmental model when speciation is environment-dependent. We explore how the strength of the environment-dependency, tree size, missing taxa, and characteristics of the paleoenvironmental curves influence the performance of the models. Finally, using these models, we infer environment-dependent diversification in two empirical phylogenies: temperature-dependence in Cetacea and Symbol-dependence in Ruminantia. We illustrate how to evaluate the relative importance of abiotic and biotic variables in these two clades and interpret these results in light of macroevolutionary hypotheses. Given the important role paleoenvironments are presumed to have played in species evolution, our statistical assessment of how environment-dependent models behave is crucial for their utility in macroevolutionary analysis.