Substantial insular speciation has resulted in exceptionally high levels of endemism in Madagascar, creating locally restricted species' ranges that remain poorly understood. The contributions of alternative processes that could influence patterns of local endemism—including speciation by geographic isolation or adaptation to environmental gradients—are widely debated, both for Madagascar and elsewhere. A recently proposed hypothesis (the “watershed hypothesis”) suggests that allopatric speciation driven by isolation in watersheds during Quaternary climate shifts provides a general explanation for patterns of local endemism across taxa in Madagascar. Here we tested coincidence between species' distributions and areas of endemism predicted by two contrasting biogeographic hypotheses: (1) the watershed hypothesis, and (2) an alternative hypothesis driven by climatic gradients (the “current climate hypothesis”). Statistical significance of coincidence was assessed by comparing against a null model. Surprisingly, we found that extant distributions of lemurs, geckos, and chameleons reveal species patterns that are significantly coincident with the watershed and current climate hypotheses. These results strongly support local endemism developing from multiple processes, even among closely related species. Our findings thus indicate that pluralistic approaches will offer the best option both for understanding processes that generate local endemism, and for incorporating endemism within conservation priority setting.