Like ants, termites are entirely eusocial and have profound ecological significance in the tropics. Following upon recent studies reporting more than a quarter of all known fossil termites, we present the first phylogeny of termite lineages using exemplar Cretaceous, Tertiary, and Recent taxa. Relationships among Recent families were largely unaffected by the addition of extinct taxa, but the analysis revealed extensive grades of stem-group taxa and the divergence of some modern families in the Cretaceous. Rhinotermitidae, Serritermitidae, and the “higher” termites (family Termitidae), which comprise 84% of the world termite species, diverged and radiated entirely in the Tertiary, corresponding to a significant increase in termite individuals in the fossil record. Radiation of the higher termites may have affected the formation of terrestrial carbon reserves like oil and coal. The higher classification of Isoptera is slightly revised based on the phylogenetic results. The following new taxa are proposed: Cratomastotermitidae, new family; Euisoptera, new clade; Archotermopsidae, new family; and Neoisoptera, new clade. In addition, the families Stolotermitidae, Stylotermitidae, and Archeorhinotermitidae are newly recognized or resurrected, and the families Termopsidae and Hodotermitidae are significantly restricted in composition.