The integration of phylogenetics, phylogeography and palaeoenvironmental studies is providing major insights into the historical forces that have shaped the Earth's biomes. Yet our present view is biased towards arctic and temperate/tropical forest regions, with very little focus on the extensive arid regions of the planet. The Australian arid zone is one of the largest desert landform systems in the world, with a unique, diverse and relatively well-studied biota. With foci on palaeoenvironmental and molecular data, we here review what is known about the assembly and maintenance of this biome in the context of its physical history, and in comparison with other mesic biomes. Aridification of Australia began in the Mid-Miocene, around 15 million years, but fully arid landforms in central Australia appeared much later, around 1-4 million years. Dated molecular phylogenies of diverse taxa show the deepest divergences of arid-adapted taxa from the Mid-Miocene, consistent with the onset of desiccation. There is evidence of arid-adapted taxa evolving from mesic-adapted ancestors, and also of speciation within the arid zone. There is no evidence for an increase in speciation rate during the Pleistocene, and most arid-zone species lineages date to the Pliocene or earlier. The last 0.8 million years have seen major fluctuations of the arid zone, with large areas covered by mobile sand dunes during glacial maxima. Some large, vagile taxa show patterns of recent expansion and migration throughout the arid zone, in parallel with the ice sheet-imposed range shifts in Northern Hemisphere taxa. Yet other taxa show high lineage diversity and strong phylogeographical structure, indicating persistence in multiple localised refugia over several glacial maxima. Similar to the Northern Hemisphere, Pleistocene range shifts have produced suture zones, creating the opportunity for diversification and speciation through hybridisation, polyploidy and parthenogenesis. This review highlights the opportunities that development of arid conditions provides for rapid and diverse evolutionary radiations, and re-enforces the emerging view that Pleistocene environmental change can have diverse impacts on genetic structure and diversity in different biomes. There is a clear need for more detailed and targeted phylogeographical studies of Australia's arid biota and we suggest a framework and a set of a priori hypotheses by which to proceed.