The most diverse and species-rich class of the phylum Porifera is Demospongiae. In recent years, the systematics of this clade, which contains more than 7000 species, has developed rapidly in light of new studies combining molecular and morphological observations. We add more than 500 new, nearly complete 18S sequences (an increase of more than 200%) in an attempt to further enhance understanding of the phylogeny of Demospongiae. Our study specifically targets representation of type species and genera that have never been sampled for any molecular data in an effort to accelerate progress in classifying this diverse lineage. Our analyses recover four highly supported subclasses of Demospongiae: Keratosa, Myxospongiae, Haploscleromorpha, and Heteroscleromorpha. Within Keratosa, neither Dendroceratida, nor its two families, Darwinellidae and Dictyodendrillidae, are monophyletic and Dictyoceratida is divided into two lineages, one predominantly composed of Dysideidae and the second containing the remaining families (Irciniidae, Spongiidae, Thorectidae, and Verticillitidae). Within Myxospongiae, we find Chondrosida to be paraphyletic with respect to the Verongida. We amend the latter to include species of the genus Chondrosia and erect a new order Chondrillida to contain remaining taxa from Chondrosida, which we now discard. Even with increased taxon sampling of Haploscleromorpha, our analyses are consistent with previous studies; however, Haliclona species are interspersed in even more clades. Haploscleromorpha contains five highly supported clades, each more diverse than previously recognized, and current families are mostly polyphyletic. In addition, we reassign Janulum spinispiculum to Haploscleromorpha and resurrect Reniera filholi as Janulum filholi comb. nov. Within the large clade Heteroscleromorpha, we confirmed 12 recently identified clades based on alternative data, as well as a sister-group relationship between the freshwater Spongillida and the family Vetulinidae. We transfer Stylissa flabelliformis to the genus Scopalina within the family Scopalinidae, which is of uncertain position. Our analyses uncover a large, strongly supported clade containing all heteroscleromorphs other than Spongillida, Vetulinidae, and Scopalinidae. Within this clade, there is a major division separating Axinellidae, Biemnida, Tetractinellida, Bubaridae, Stelligeridae, Raspailiidae, and some species of Petromica, Topsentia, and Axinyssa from Agelasida, Polymastiidae, Placospongiidae, Clionaidae, Spirastrellidae, Tethyidae, Poecilosclerida, Halichondriidae, Suberitidae, and Trachycladus. Among numerous results: (1) Spirophorina and its family Tetillidae are paraphyletic with respect to a strongly supported Astrophorina within Tetractinellida; (2) Agelasida is the earliest diverging lineage within the second clade listed above; and (3) Merlia and Desmacella appear to be the earliest diverging lineages of Poecilosclerida.