The 'tree lobsters' are an enigmatic group of robust, ground-dwelling stick insects (order Phasmatodea) from the subfamily Eurycanthinae, distributed in New Guinea, New Caledonia and associated islands. Its most famous member is the Lord Howe Island stick insect Dryococelus australis (Montrouzier), which was believed to have become extinct but was rediscovered in 2001 and is considered to be one of the rarest insects in the world. To resolve the evolutionary position of Dryococelus, we constructed a phylogeny from approximately 2.4 kb of mitochondrial and nuclear sequence data from representatives of all major phasmatodean lineages. Our data placed Dryococelus and the New Caledonian tree lobsters outside the New Guinean Eurycanthinae as members of an unrelated Australasian stick insect clade, the Lanceocercata. These results suggest a convergent origin of the 'tree lobster' body form. Our reanalysis of tree lobster characters provides additional support for our hypothesis of convergent evolution. We conclude that the phenotypic traits leading to the traditional classification are convergent adaptations to ground-living behaviour. Our molecular dating analyses indicate an ancient divergence (more than 22 Myr ago) between Dryococelus and its Australian relatives. Hence, Dryococelus represents a long-standing separate evolutionary lineage within the stick insects and must be regarded as a key taxon to protect with respect to phasmatodean diversity.