The taxon currently known as Isothecium myosuroides var.brachythecioides (Dixon)Braithw is reinstated as a species, I. interludens Stirt., the name originally assigned by Stirton when it was first described. The morphological characters separating I. myosuroides s.s. and I. interludens are summarised. The sporophytes of I. interludens, described here for the first time, differ in shape, and pattern of exothecial cells from those of I. myosuroides. A molecular analysis based on variation of the ITS region shows that I. holtii Kindb. and I. alopecuroides (Lam. ex Dubois) Isov. are not monophyletic, calling for a re-assessment of these species, whereas the monophyly of the other species, including I. interludens, cannot be rejected. The analysis failed, however, to yield molecular synapomorphies for I. interludens and other species within I. myosuroides s.l., which we interpret as the incomplete sorting of alleles among recently evolved species. Isothecium interludens is a European endemic with a hyperoceanic temperate distribution. Its nested position within a clade including the two Macaronesian endemics I. prolixum (Mitt.) M.Stech and I. montanum Draper, Hedenäs, M.Stech, T.Lopes & Sim-Sim is suggestive of a Macaronesian origin, in line with the idea that the European Atlantic fringe flora assembled during the course of the last interglacial from Macaronesian ancestors. Isothecium therefore offers a model of prime importance for the study of ongoing speciation in mosses.