Revolutionary new concepts of bryophyte relationships have emerged from molecular phylogenetic analyses conducted since the onset of the 21^st century. For example, sequence data contradict the historical notion that isophylly in leafy liverworts is plesiomorphic and that simple thalloid liverworts are monophyletic. Also contrary to traditional views are the concepts that Leiosporoceros is genetically distinct from other hornworts and that Oedipodium is sister to the peristomate mosses. Substantial increases in ultrastructural and anatomical data likewise have provided new insights on interrelationships. Because of this recent deluge in evolutionary studies on bryophytes, it is an opportune time to co-examine contemporary morphological knowledge and novel molecular hypotheses. An understanding of bryophyte evolution and biology is essential to identify structural innovations that accompanied early land colonization and to illuminate the evolution of more complicated body plans in tracheophytes. In this review, we examine the progress that has been made since the 1999 International Botanical Congress in clarifying the evolutionary history of the three groups of bryophytes. The state of our knowledge on interrelationships is discussed, with poorly-known, genetically divergent taxa illustrated for each group. Our review of bryophyte evolution includes a reëvaluation of the evolution of sperm cells, sporogenesis, stomata, symbioses, conducting cells and chloroplast ultrastructure in hornworts. We explore the prospects for future discoveries and advances with an emphasis on fundamental evolutionary problems that remain and the challenges that must be met to resolve them.