Despite their abundance and ecological importance in a wide variety of shallow and deep water marine communities, octocorals (soft corals, sea fans, and sea pens) are a group whose taxonomy and phylogenetic relationships remain poorly known and little studied. The group is currently divided into three orders (O: Alcyonacea, Pennatulacea, and Helioporacea); the large O. Alcyonacea (soft corals and sea fans) is further subdivided into six sub-ordinal groups on the basis of skeletal composition and colony growth form. We used 1429bp of two mitochondrial protein-coding genes, ND2 and msh1, to construct a phylogeny for 103 octocoral genera representing 28 families. In agreement with a previous 18S rDNA phylogeny, our results support a division of Octocorallia into two major clades plus a third, minor clade. We found one large clade (Holaxonia-Alcyoniina) comprising the sea fan sub-order Holaxonia and the majority of soft corals, and a second clade (Calcaxonia-Pennatulacea) comprising sea pens (O. Pennatulacea) and the sea fan sub-order Calcaxonia. Taxa belonging to the sea fan group Scleraxonia and the soft coral family Alcyoniidae were divided among the Holaxonia-Alcyoniina clade and a third, small clade (Anthomastus-Corallium) whose relationship to the two major clades was unresolved. In contrast to the previous studies, we found sea pens to be monophyletic but nested within Calcaxonia; our analyses support the sea fan family Ellisellidae as the sister taxon to the sea pens. We are unable to reject the hypothesis that the calcaxonian and holaxonian skeletal axes each arose once and suggest that the skeletal axis of sea pens is derived from that of Calcaxonia. Topology tests rejected the monophyly of sub-ordinal groups Alcyoniina, Scleraxonia, and Stolonifera, as well as 9 of 14 families for which we sampled multiple genera. The much broader taxon sampling and better phylogenetic resolution afforded by our study relative to the previous efforts greatly clarify the relationships among families and sub-ordinal groups within each of the major clades. The failure of these mitochondrial genes as well as previous 18S rDNA studies to resolve many of the deeper nodes within the tree (including its root) suggest that octocorals underwent a rapid radiation and that large amounts of sequence data will be required in order to resolve the basal relationships within the clade.