We use a new molecular phylogeny, developed from small and large subunit ribosomal RNA genes, to explore evolution of the digenean life cycle. Our approach is to map character states on the phylogeny and then use parsimony to infer how the character evolved. We conclude that, plesiomorphically, digenean miracidia hatched from eggs and penetrated gastropod first intermediate hosts externally. Fork-tailed cercariae were produced in rediae and emerged from the snail to be eaten directly by the teleost definitive host. These plesiomorphic characters are seen in extant Bivesiculidae. We infer that external encystment and the use of second intermediate hosts are derived from this behaviour and that second intermediate hosts have been adopted repeatedly. Tetrapod definitive hosts have also been adopted repeatedly. The new phylogeny proposes a basal dichotomy between 'Diplostomida' (Diplostomoidea, Schistosomatoidea and Brachylaimoidea) and 'Plagiorchiida' (all other digeneans). There is no evidence for coevolution between these clades and groups of gastropods. The most primitive life cycles are seen in basal Plagiorchiida. Basal Diplostomida have three-host life cycles and are associated with tetrapods. The blood flukes (Schistosomatoidea) are inferred to have derived their two-host life cycles by abbreviating three-host cycles. Diplostomida have no adult stages in fishes except by life cycle abbreviation. We present and test a radical hypothesis that the blood-fluke cycle is plesiomorphic within the Diplostomida.