As a part of a large-scale biogeographical study we examined the evolutionary relationships and taxonomic position of Marasmius epidryas, one of the most typical circumpolar arctic-alpine fungi, characterized by a specific, saprobic affinity to dead tissues of Dryas spp. A phylogenetic analysis based on nLSU and RPB2 DNA regions unequivocally indicated the phylogenetic placement of this species within the Physalacriaceae. The Bayesian MCMCMC analysis as well as other inference methods tested (ML, NJ) revealed a well supported affinity of M. epidryas to Rhizomarasmius pyrrhocephalus, type species of a recently circumscribed genus, Rhizomarasmius. As a consequence, based on these results, we introduce a new combination, Rhizomarasmius epidryas (Kühner ex A. Ronikier) A. Ronikier and M. Ronikier. Thus our results demonstrate that neither the traditional taxonomic placement of the fungus in genus Marasmius nor the recent transfer into genus Mycetinis are phylogenetically correct. In contrast they support the importance of the third lineage of the polyphyletic Marasmius s. l., having evolutionary links with taxa forming the Physalacriaceae clade of agaricoid fungi. In addition the lineage of Rhizomarasmius was confirmed to be closely related to the representatives of Gloiocephala, comprising small, often narrowly specialized saprobic species previously also classified within Marasmius s. l.