Direct development in benthic marine invertebrates is usually associated with narrow geographical range, low rates of colonization, and low levels of gene flow. Paradoxically, the small brittle star Amphipholis squamata broods its larvae to a crawl-away juvenile stage, yet has a cosmopolitan distribution. Using sequence and restriction-fragment-length-polymorphisms (RFLP) analyses of nuclear and mitochondrial DNA from 16 coastal populations throughout New Zealand, we tested whether the species is indeed a poor disperser, as may be expected from its brooding habit. We predicted that local and regional populations would be genetically structured according to isolation by distance. We also suspected that this ubiquitous “species” is composed of a variety of cryptic taxa in different geographic areas, as has been discovered in an increasing number of marine invertebrates. We found evidence of four genetically divergent and reproductively isolated lineages that can exist in syntopy. Lineages vary in abundance, haplotype diversity, and geographic distribution. The partitioning of genetic variation within the most common lineage, as well as the geographic distribution of the four lineages, suggest a north/south split. This pattern is consistent with known New Zealand marine biogeographic zones and appears to be linked to the regime of oceanic circulation, which is characterized by subtropical, southward-moving water masses in the north, and sub-Antarctic, northward-moving water in the south. We conclude that the dispersal ability of A. squamata is regionally restricted but with sporadic long-distance dispersal, which serves to increase local genetic variation. Our results support the idea that dispersal occurs through passive transport by drifting or rafting on macroalgae, which A. squamata commonly inhabits, and emphasize that poor dispersal ability is not necessarily a corollary of direct development.