Differentiating between ancient and younger, more rapidly evolved clades is important for determining paleoenvironmental drivers of diversification. Australia possesses many aridity-adapted lineages, the origins of which have been closely linked to late Miocene continental aridification. Using dental macrowear and molar crown height measurements, spanning the past 25 million years, we show that the most iconic Australian terrestrial mammals, “true” kangaroos (Macropodini), adaptively radiated in response to mid-Pliocene grassland expansion rather than Miocene aridity. In contrast, low-crowned, short-faced kangaroos radiated into predominantly browsing niches as the late Cenozoic became more arid, contradicting the view that this was an interval of global browser decline. Our results implicate warm-to-cool climatic oscillations as a trigger for adaptive radiation and refute arguments attributing Pleistocene megafaunal extinction to aridity-forced dietary change.