Potamogeton is a taxonomically problematic genus of aquatic monocotyledons, which has received limited phylogenetic study using molecular data. The group is known for extensive vegetative plasticity, confusing patterns of morphological variation and propensity for hybridization. Potamogeton gemmiparus and P. vaseyi are of conservation concern in North America where both are listed as imperiled. These vegetatively similar species are particularly difficult to distinguish in the absence of floating leaves. We studied both species and putatively related taxa in subsection Pusilli (e.g. P. clystocarpus, P. foliosus, and P. pusillus) to elucidate relationships and to develop an identification method using molecular markers. Phylogenetic analyses of nrITS and trnK 5′ intron sequence data clearly endorse the recognition of P. gemmiparus and P. vaseyi as distinct species but call into question the subspecific circumscription of P. pusillus currently followed in North America. Our data resolved P. pusillus in a clade with P. foliosus, separated substantially from P. berchtoldii (= P. pusillus subsp. tenuissimus), thus supporting the recognition of P. berchtoldii as a distinct species. Using molecular cloning techniques, we documented three clear examples of interspecific hybridization (P. foliosus × P. pusillus, P. berchtoldii × P. vaseyi, and P. gemmiparus × P. vaseyi). Simple DNA polymorphisms also indicated several P. berchtoldii × P. gemmiparus hybrids. The narrowly distributed P. gemmiparus and P. clystocarpus are similar morphologically and genetically to the wide-ranging P. berchtoldii, with which they both hybridize. We recommend either the recognition of P. gemmiparus and P. clystocarpus as distinct species, or more suitably as subspecies of P. berchtoldii, for which two new combinations are provided: P. berchtoldii subsp. gemmiparus and P. berchtoldii subsp. clystocarpus.