Paepalanthus, in its current sense, is the most diverse genus of Eriocaulaceae in the Neotropics, comprising about 400 species. Previous studies have consistently found that the genus is not monophyletic, also being morphologically heterogeneous and diagnosable by a set of homoplasies; thus, the current circumscription needs to be revised. The new classification proposed here uses a comprehensive phylogeny of Paepalanthus and closely related genera as a framework and an evaluation of a set of morphological characters using ancestral state reconstruction, which allowed the recognition of strongly supported clades with morphological diagnosability. We propose the recognition of 12 genera in the clade encompassing Paepalanthus and allied groups, including six new genera (Coracoralina, Floralia, Giuliettia, Gnomus, Hydriade, Nisius), two new statuses (Cryptanthella, Monosperma), the reestablishment of Actinocephalus, Lachnocaulon, and Tonina, and a recircumscription of Paepalanthus. In this new circumscription, Paepalanthus comprises 257 species, most of them restricted to the Brazilian campos rupestres. Among the proposed genera, nine have potential morphological synapomorphies, one has a restricted geographical distribution, and the other two can be recognized by a combination of characters. Newly generated seed morphology data is consistent within the different genera and plays an important role in their recognition. A total of 136 new combinations are hereby proposed. We provide a genus-level identification key, as well as generic descriptions, diagnostic features, photos illustrating their morphological diversity, maps and notes on distribution, and lists of species by genus.