Bats make up more than 20% of extant mammals, yet their evolutionary history is largely unknown because of a limited fossil record and conflicting or incomplete phylogenies. Here, we present a highly resolved molecular phylogeny for all extant bat families. Our results support the hypothesis that megabats are nested among four major microbat lineages, which originated in the early Eocene [52 to 50 million years ago (Mya)], coincident with a significant global rise in temperature, increase in plant diversity and abundance, and the zenith of Tertiary insect diversity. Our data suggest that bats originated in Laurasia, possibly in North America, and that three of the major microbat lineages are Laurasian in origin, whereas the fourth is Gondwanan. Combining principles of ghost lineage analysis with molecular divergence dates, we estimate that the bat fossil record underestimates (unrepresented basal branch length, UBBL) first occurrences by, on average, 73% and that the sum of missing fossil history is 61%.