Patterns of species richness among clades can be directly explained by the ages of clades or their rates of diversification. The factors that most strongly influence diversification rates remain highly uncertain, since most studies typically consider only a single predictor variable. Here, we explore the relative impacts of macroclimate (i.e., occurring in tropical vs. temperate regions) and microhabitat use (i.e., terrestrial, fossorial, arboreal, aquatic) on diversification rates of squamate reptile clades (lizards and snakes). We obtained data on microhabitat, macroclimatic distribution, and phylogeny for >4000 species. We estimated diversification rates of squamate clades (mostly families) from a time-calibrated tree, and used phylogenetic methods to test relationships between diversification rates and microhabitat and macroclimate. Across 72 squamate clades, the best-fitting model included microhabitat but not climatic distribution. Microhabitat explained ∼37% of the variation in diversification rates among clades, with a generally positive impact of arboreal microhabitat use on diversification, and negative impacts of fossorial and aquatic microhabitat use. Overall, our results show that the impacts of microhabitat on diversification rates can be more important than those of climate, despite much greater emphasis on climate in previous studies.