Phylogeographic studies of continental clades, especially when combined with palaeoclimate modelling, provide powerful insight into how environment drives speciation across climatic contexts. Australia, a continent characterized by disparate modern biomes and dynamic climate change, provides diverse opportunity to reconstruct the impact of past and present environments on diversification. Here, we use genomic‐scale data (1310 exons and whole mitogenomes from 111 samples) to investigate Pleistocene diversification, cryptic diversity, and secondary contact in the Australian delicate mice (Hydromyini: Pseudomys), a recent radiation spanning almost all Australian environments. Across northern Australia, we find no evidence for introgression between cryptic lineages within Pseudomys delicatulus sensu lato, with palaeoclimate models supporting contraction and expansion of suitable habitat since the last glacial maximum. Despite multiple contact zones, we also find little evidence of introgression at a continental scale, with the exception of a potential hybrid zone in the mesic biome. In the arid zone, combined insights from genetic data and palaeomodels support a recent expansion in the arid specialist P. hermannsburgensis and contraction in the semi‐arid P. bolami. In the face of repeated secondary contact, differences in sperm morphology and chromosomal rearrangements are potential mechanisms that maintain species boundaries in these recently diverged species. Additionally, we describe the western delicate mouse as a new species and recommend taxonomic reinstatement of the eastern delicate mouse. Overall, we show that speciation in an evolutionarily young and widespread clade has been driven by environmental change, and potentially maintained by divergence in reproductive morphology and chromosome rearrangements.