Abstract: Vetulicolians have variously been considered to be unusual arthropods, stem‐group deuterostomes or relatives of the tunicates. They are known from a number of Cambrian Lagerstätten, and are particularly diverse in the Chengjiang biota of Yunnan Province, China. We recognize two classes, Vetulicolida and Banffozoa, which together form a monophyletic group. Within the Chinese collections we also identify two new species and recognize one new genus:Vetulicola monilesp. nov. andBullivetula variolagen. et sp. nov. The evidence from new and previously described specimens is used to undertake a phylogenetic analysis and to evaluate a range of hypotheses for the affinities of vetulicolians. Given the difficulties of interpreting features in enigmatic fossils and the apparently contradictory set of characters possessed by vetulicolians, it is not possible on current evidence to reach an unequivocal conclusion regarding the phylogenetic position of the group. One possibility is that they are a sister group of arthropods that lost limbs but gained gill structures analogous to those of deuterostomes, but several features remain unexplained by this model. If they are protostomes, a more generally parsimonious position is close to the kinorhynchs. An alternative is that they are deuterostomes, although a placement at the base of the clade is not supported by the evidence. If they are deuterostomes, it is more likely that they are close to the tunicates.