Species trees were produced for the Indo-West Pacific (IWP) gastropod genus Lunella using MrBayes, BEAST, and *BEAST with sequence data from four genes. Three fossil records were used to calibrate a molecular clock. Eight cryptic species were recognized using statistical methods for species delimitation in combination with morphological differences. However, our results suggest caution in interpreting ESUs defined solely by the general mixed Yule Coalescent model in genera like Lunella, with lower dispersal abilities. Four almost entirely allopatric species groups were recovered that differ in ecology and distribution. Three groups occur predominantly along continental coastlines and one occurs on island arrays. Sympatric species occur only in the torquata and coronata groups along coastlines, whereas species in the cinerea group, distributed in two-dimensional island arrays, occur in complete allopatry. Dispersal along island arcs has been important in the maintenance of species distributions and gene flow among populations in the cinerea group. The emergence of new islands and their eventual subsidence over geological time has had important consequences for the isolation of populations and the eventual rise of new species in Lunella.