Liparidae (snailfishes) is one of the most diverse and abundant fish families in polar and deep-sea habitats. However, the evolution of this family is poorly known because of the rarity of many species and difficulties in scoring morphological characters. We perform phylogenetic analyses of Liparidae using sequences from two mtDNA genes, 16S (585 bp) and cytochrome b (426 bp), and 84 morphological characters from 24 species of Liparidae and 4 species of Cyclopteridae (outgroup). The present study confirms earlier hypotheses that the shallow-water genera, such as Liparis and Crystallichthys, occupy basal positions and that deep-water genera, such as Careproctus, Elassodiscus, Rhinoliparis, Paraliparis, Rhodichthys and Psednos, are increasingly derived. The later two genera form a terminal clade which does not include Paraliparis. The topology shows that the family has undergone a reductive type of evolution, with a gradual loss of characters (e.g. sucking disc/pelvic fins, pseudobranchial filaments, skin spinules). Nectoliparis, which had previously been placed either as the basal most genus or among the most derived genera, are found to occupy the most basal position among the taxa analyzed. This result indicates that the sucking disc has been lost at least twice during the evolution of the Liparidae. The basal position of Nectoliparis is supported by its plesiomorphic otolith morphology, whereas an advanced overgrown otolith ostium, unique among teleosts, is found to be apomorphic for a clade containing the derived genera: Paraliparis, Psednos, Rhinoliparis and Rhodichthys. We also identify the presence of probable nuclear inserts of mitochondrial DNA (Numts) in three species of Careproctus and in Elassodiscus caudatus.