Madagascar is home to numerous endemic species and lineages, but the processes that have contributed to its endangered diversity are still poorly understood. Evidence is accumulating to demonstrate the importance of Tertiary dispersal across varying distances of oceanic barriers, supplementing vicariance relationships dating back to the Cretaceous, but these hypotheses remain tentative in the absence of well-supported phylogenies. In the Papilio demoleus group of swallowtail butterflies, three of the five recognized species are restricted to Madagascar, whereas the remaining two species range across the Afrotropical zone and southern Asia plus Australia. We reconstructed phylogenetic relationships for all species in the P. demoleus group, as well as 11 outgroup Papilio species, using 60 morphological characters and about 4 kb of nucleotide sequences from two mitochondrial (cytochrome oxidase I and II) and two nuclear (wg and EF-1a) genes. Of the three endemic Malagasy species, the two that are formally listed as endangered or at risk represented the most basal divergences in the group, while the more common third endemic was clearly related to African P. demodocus. The fifth species, P. demoleus, showed little differentiation across southern Asia, but showed divergence from its subspecies sthenelus in Australia. Dispersal-vicariance analysis using cladograms derived from morphology and three independent genes indicated a Malagasy diversification of lime swallowtails in the middle Miocene. Thus, diversification processes on the island of Madagascar may have contributed to the origin of common butterflies that now occur throughout much of the Old World tropical and subtemperate regions. An alternative hypothesis, that Madagascar is a refuge for ancient lineages resulting from successive colonizations from Africa, is less parsimonious and does not explain the relatively low continental diversity of the group.