Rabbitfish (Siganidae) are coral reef fish that are distributed across diverse habitats that include estuaries, mangroves, reefs, and even seaweed mats. Given their ecological diversity and natural widespread distributions across the Indo-Pacific region, we were interested to investigate the evolutionary history of this group and patterns of divergence that have contributed to their present-day distributions. In the present study, samples were collected from the South China Sea to study taxonomic and phylogenetic relationships, and divergence times. We investigated the taxonomic relationships among modern rabbitfish species, reconstructed their molecular phylogeny, and estimated divergence times among selected lineages based on a fragment of the mtDNA cytochrome oxidase I (COI) and sequences of the nuclear rhodopsin retrogene (RHO). Our results indicate that modern rabbitfish likely originated in the Indo-West Pacific during the late Eocene [37.4 million years ago (mya)], following which they diverged into three major clades during the Pliocene/Pleistocene. Subsequent diversification and origins of the majority of siganids may likely be associated with episodes of paleo-oceanographic events, including greenhouse and glaciation events (Eocene–Miocene) as well as major plate tectonic events (Pliocene–Pleistocene). Some modern siganid species may naturally hybridize with congeneric species where their geographical ranges overlap. A comprehensive taxonomic analysis revealed that the phylogeny of Siganidae (cladogenesis of Clades I, II, and III) is characterized by divergence in several external morphological characters and morphometric parameters. Our study demonstrates that morphological characteristics, geographical heterogeneity, and environmental change have contributed to siganids’ historical diversification.