Bats (order Chiroptera) are one of the few orders of mammals that echolocate and the only group with the capacity for powered flight. The order is subdivided into Microchiroptera and Megachiroptera, with an array of characteristics defining each group, including complex laryngeal echolocation systems in microbats and enhanced visual acuity in megabats. The respective monophylies of the two suborders have been tacitly assumed, although microbat monophyly is uncorroborated by molecular data. Here we present a phylogenetic analysis of bat relationships using DNA sequence data from four nuclear genes and three mitochondrial genes (total of 8,230 base pairs), indicating that microbat families in the superfamily Rhinolophoidea are more closely related to megabats than they are to other microbats. This implies that echolocation systems either evolved independently in rhinolophoids and other microbats or were lost in the evolution of megabats. Our data also reject flying lemur (order Dermoptera) as the bat sister group, indicating that presumed shared derived characters for flying lemurs and bats are convergent features that evolved in association with gliding and flight, respectively.