The family Pomacentridae is a species-rich group of primarily marine fishes. The phylogenetic relationships of the damselfishes are examined herein using sequence data from five mitochondrial (12S, 16S, ATP synthase subunits 8/6, cytochrome b, and cytochrome c oxidase I) and three nuclear (histone H3, recombination activating gene 1 exon 3, and Tmo-4C4) loci. A combined data matrix of 6,865 base pairs was compiled for 462 taxa, representing 322 damselfish species, and used to reconstruct the phylogeny of pomacentrids via maximum likelihood. The resulting topology supports the monophyly of the family and some groups within it, corroborating some conclusions drawn by recent studies but contradicting others. We find that the family is composed of four major lineages, recognized herein as the subfamilies Chrominae, Glyphisodontinae, Microspathodontinae, and Pomacentrinae. The subfamily Microspathodontinae is sister to a clade of the other three subfamilies, and the subfamily Glyphisodontinae is sister to a clade of Chrominae and Pomacentrinae. The monotypic subfamily Lepidozyginae is recovered within Microspathodontinae and placed in the synonymy of Microspathodontinae. Species of Plectroglyphidodon and Stegastes are reassigned to maintain the monophyly of both genera. In Chrominae, the generic limits of Azurina and Chromis are revised to reflect monophyletic groups. The genus-group name Pycnochromis is resurrected to accommodate a group of former Chromis sister to Dascyllus. In Pomacentrinae, the genus Premnas is recovered within Amphiprion and placed in the synonymy of Amphiprion. The genus Chrysiptera is broadly polyphyletic within Pomacentrinae. The genus Amblypomacentrus is revised to accommodate some species formerly classified as Chrysiptera.