South-East Asia covers four of the world's biodiversity hotspots, showing high species diversity and endemism. Owing to the successive expansion and contraction of distribution and the fragmentation by geographical barriers, the tropical flora greatly diversified in this region during the Tertiary, but the evolutionary tempo and mode of species diversity remain poorly investigated. Paphiopedilum, the largest genus of slipper orchids comprising nearly 100 species, is mainly distributed in South-East Asia, providing an ideal system for exploring how plant species diversity was shaped in this region. Here, we investigated the evolutionary history of this genus with eight cpDNA regions and four low-copy nuclear genes. Discordance between gene trees and network analysis indicates that reticulate evolution occurred in the genus. Ancestral area reconstruction suggests that vicariance and long-distance dispersal together led to its current distribution. Diversification rate variation was detected and strongly correlated with the species diversity in subg. Paphiopedilum (~80 species). The shift of speciation rate in subg. Paphiopedilum was coincident with sea-level fluctuations in the late Cenozoic, which could have provided ecological opportunities for speciation and created bridges or barriers for gene flow. Moreover, some other factors (e.g. sympatric distribution, incomplete reproductive barriers and clonal propagation) might also be advantageous for the formation and reproduction of hybrid species. In conclusion, our study suggests that the interplay of reticulate evolution and sea-level fluctuations has promoted the diversification of the genus Paphiopedilum and sheds light into the evolution of Orchidaceae and the historical processes of plant species diversification in South-East Asia.