Although the family Sciuridae is large and well known, phylogenetic analyses are scarce. We report on a comprehensive molecular phylogeny for the family. Two nuclear genes (c-myc and RAG1) comprising approximately 4500 bp of data (most in exons) are applied for the first time to rodent phylogenetics. Parsimony, likelihood, and Bayesian analyses of the separate gene regions and combined data reveal five major lineages and refute the conventional elevation of the flying squirrels (Pteromyinae) to subfamily status. Instead, flying squirrels are derived from one of the tree squirrel lineages. C-myc indels corroborate the sequence-based topologies. The common ancestor of extant squirrels appears to have been arboreal, confirming the fossil evidence. The results also reveal an unexpected clade of mostly terrestrial squirrels with African and Holarctic centers of diversity. We present a revised classification of squirrels. Our results demonstrate the phylogenetic utility of relatively slowly evolving nuclear exonic data even for relatively recent clades.