Sexual systems are highly diverse and have profound consequences for population dynamics and resilience. Yet, little is known about how they evolved. Using phylogenetic Bayesian modelling on 4740 species, we show that gonochorism is the likely ancestral condition in teleost fish. While all hermaphroditic forms revert quickly to gonochorism, protogyny and simultaneous hermaphroditism are evolutionarily more stable than protandry. Importantly, simultaneous hermaphroditism can evolve directly from gonochorism, in contrast to theoretical expectations. We find support for predictions from life history theory that protogynous species live longer than gonochoristic species, are smaller than protandrous species, have males maturing later than protandrous males, and invest the least in male gonad mass. The large-scale distribution of sexual systems on the tree of life does not seem to reflect just adaptive predictions and thus does not fully explain why some sexual forms evolve in some taxa but not others (William’s paradox). We propose that future studies should take into account the diversity of sex determining mechanisms. Some of these might constrain the evolution of hermaphroditism, while the non-duality of the embryological origin of teleost gonads might explain why protogyny predominates over protandry in this extraordinarily diverse group of animals.