Physalis (75 species, Solanaceae) is most diverse in Mexico, with only the type, P. alkekengi, native to the Old World. Interspecific relationships are poorly known, and despite the distinctive inflated fruiting calyces, generic limits remain uncertain. Sequence data from part of the nuclear gene waxy (622 bp) and the internal transcribed spacer of the nrDNA (652 bp) were used to generate a phylogeny of subtribe Physalinae. Thirty-five species of Physalis and eight physaloid genera were sequenced. Data analysis included Bayesian and maximum parsimony methods. The Physalinae was monophyletic, but while the morphologically typical Physalis species formed a strongly supported clade, the morphologically atypical species made the genus paraphyletic. A grade of physaloid genera (Quincula, Oryctes, and Chamaesaracha) and Physalis subgenus Physalodendron separate P. alkekengi, P. carpenteri, and P. microphysa from other Physalis species. The Physalis clade consists of Margaranthus and species with solitary yellow flowers and highly inflated calyces. Most sections of Physalis do not appear to be monophyletic. Leucophysalis viscosa and the Central American physaloid genera Brachistus, Tzeltalia, and Witheringia formed a clade at the base of the Physalinae.