Background: The Indonesian island of Sulawesi has a complex geological history. It is composed of several landmasses that have arrived at a near modern configuration only in the past few million years. It is the largest island in the biodiversity hotspot of Wallacea—an area demarcated by the biogeographic breaks between Wallace’s and Lydekker’s lines. The mammal fauna of Sulawesi is transitional between Asian and Australian faunas. Sulawesi’s three genera of squirrels, all endemic (subfamily Nannosciurinae: Hyosciurus, Rubrisciurus and Prosciurillus), are of Asian origin and have evolved a variety of phenotypes that allow a range of ecological niche specializations. Here we present a molecular phylogeny of this radiation using data from museum specimens. High throughput sequencing technology was used to generate whole mitochondrial genomes and a panel of nuclear ultraconserved elements providing a large genome-wide dataset for inferring phylogenetic relationships. Results: Our analysis confirmed monophyly of the Sulawesi taxa with deep divergences between the three endemic genera, which predate the amalgamation of the current island of Sulawesi. This suggests lineages may have evolved in allopatry after crossing Wallace’s line. Nuclear and mitochondrial analyses were largely congruent and well supported, except for the placement of Prosciurillus murinus. Mitochondrial analysis revealed paraphyly for Prosciurillus, with P. murinus between or outside of Hyosciurus and Rubrisciurus, separate from other species of Prosciurillus. A deep but monophyletic history for the four included species of Prosciurillus was recovered with the nuclear data. Conclusions: The divergence of the Sulawesi squirrels from their closest relatives dated to ~9.7–12.5 million years ago (MYA), pushing back the age estimate of this ancient adaptive radiation prior to the formation of the current conformation of Sulawesi. Generic level diversification took place around 9.7 MYA, opening the possibility that the genera represent allopatric lineages that evolved in isolation in an ancient proto-Sulawesian archipelago. We propose that incongruence between phylogenies based on nuclear and mitochondrial sequences may have resulted from biogeographic discordance, when two allopatric lineages come into secondary contact, with complete replacement of the mitochondria in one species.