The taxonomy of the cliff fern family Woodsiaceae has been controversial with 22–59 species in 1–7 genera recognized in various classifications. This is mainly due to limited taxon sampling (up to 33 accessions representing up to 21 species) and poor resolution in molecular studies so far. In the present study, DNA sequences of five plastid markers (atpA, matK, rbcL, rps4 + rps4‐trnS, trnL + trnL‐F) of 152 accessions representing ca. 43 out of ca. 65 species estimated of Woodsiaceae (122 accessions), and 30 non‐Woodsiaceae accessions from the most closely related four families (Athyriaceae, Blechnaceae, Onocleaceae, Thelypteridaceae) were used to infer a phylogeny. Our major results include: (1) Woodsiaceae are strongly supported as monophyletic; (2) Two major clades representing the deepest split in Woodsiaceae are identified, corresponding to the two recently proposed subfamilies, Woodsioideae and Protowoodsioideae; (3) Within Woodsioideae and Protowoodsioideae, two and three well‐supported subclades, respectively, are determined; (4) Cheilanthopsis is resolved as paraphyletic in relation to Hymenocystis (sampled for the first time) and Protowoodsia; (5) Physematium and Woodsiopsis are paraphyletic in relation to a clade containing Cheilanthopsis, Hymenocystis, and Protowoodsia; (6) Evolution of 13 morphological characters is inferred in a phylogenetic context, and morphological synapomorphies of each of the five major subclades are identified; (7) We propose to recognize two genera in Woodsiaceae based on deep divergence (ca. 45 Ma), morphology, chromosome number, and geographic distribution: Physematium (syn.: Cheilanthopsis, Hymenocystis, Protowoodsia, Woodsiopsis) and Woodsia (syn.: Eriosoriopsis), and Physematium is further divided into three subgenera and Woodsia into two subgenera; (8) we describe ×Woodsimatium, a hybrid genus (nothogen. nov.) between the two genera recognized. A taxonomic synopsis of the family is provided, and 15 new combinations are made.