Shrimps of the genus Palaemon Weber, 1795 comprise of 86 species with a wide morphological and ecological variability along the tropical and temperate regions. Studies based on molecular data have indicated that despite a recent taxonomic rearrangement, it may remain not monophyletic. On the other hand, cladistic, morphological analyses have suggested the presence of synapomorphies, implying a natural status for the genus. In this work, a broad taxonomic and molecular sampling is applied to verify whether Palaemon is a monophyletic taxon and, based on the recovered phylogeny, identify geographical and morphological patterns related to the lineages. Partial sequences of 16S rRNA, histone H3 and 18S rRNA from 60 species of Palaemon and 15 species from other genera of Palaemonidae were analysed. In addition, previously used characters as well as novel diagnostic characters were scrutinized. The present phylogeny indicates that the species of Palaemon fall into three distinct lineages and that the colonization of America and Europe likely occurred multiple times. Morphological characters allow for the identification of at least four monophyletic groups in Palaemon; two of which are monospecific at the moment. Based on the present results, it may become necessary to establish two new genera (to accommodate Palaemon concinnus and Palaemon mercedae, respectively), as well as re‐erect the genus Alaocaris Holthuis, 1949 for Palaemon antrorum, potentially including a further six American species.