Even though the marsupial order Diprotodontia is one of the most heavily studied groups of Australasian marsupials, phylogenetic relationships within this group remain contentious. The more than 125 living species of Diprotodontia can be divided into two main groups: Vombatiformes (wombats and koalas) and Phalangerida. Phalangerida is composed of the kangaroos (Macropodidae, Potoroidae, and Hypsiprymnodontidae) and possums (Phalangeridae, Burramyidae, Petauridae, Pseudocheiridae, Tarsipedidae, and Acrobatidae). Much of the debate has focused on relationships among the families of possums and whether possums are monophyletic or paraphyletic. A limitation of previous investigations is that no study to date has investigated diprotodontian relationships using all genera. Here, we examine diprotodontian interrelationships using a nuclear multigene molecular data set representing all recognized extant diprotodontian genera. Maximum parsimony, maximum likelihood, and Bayesian methods were used to analyze sequence data obtained from protein-coding portions of ApoB, BRCA1, IRBP, Rag1, and vWF. We also applied a Bayesian relaxed molecular clock method to estimate times of divergence. Diprotodontia was rooted between Vombatiformes and Phalangerida. Within Phalangerida, the model-based methods strongly support possum paraphyly with Phalangeroidea (Burramyidae+Phalangeridae) grouping with the kangaroos (Macropodiformes) to the exclusion of Petauroidea (Tarsipedidae, Acrobatidae, Pseudocheiridae, and Petauridae). Within Petauroidea, Tarsipedidae grouped with both Petauridae and Pseudocheiridae to the exclusion of Acrobatidae. Our analyses also suggest that the diprotodontian genera Pseudochirops and Strigocuscus are paraphyletic and diphyletic, respectively, as currently recognized. Dating analyses suggest Diprotodontia diverged from other australidelphians in the late Paleocene to early Eocene with all interfamilial divergences occurring prior to the early Miocene except for the split between the Potoroidae and Macropodidae, which occurred sometime in the mid-Miocene. Ancestral state reconstructions using a Bayesian method suggest that the patagium evolved independently in the Acrobatidae, Petauridae, and Pseudocheiridae. Ancestral state reconstructions of ecological venue suggest that the ancestor of Diprotodontia was arboreal. Within Diprotodontia, the common ancestor of Macropodidae was reconstructed as terrestrial, suggesting that tree kangaroos (Dendrolagus) are secondarily arboreal.