Most Triassic terrestrial diapsids belong to two clades, Lepidosauromorpha or (the more diverse) Archosauromorpha. Nevertheless, the phylogenetic relationships of some Triassic diapsids have remained uncertain for decades because of the lack of preservation of phylogenetically relevant anatomical regions or because of unusual combinations of features. One of these enigmatic forms is the small-sized Sphodrosaurus pennsylvanicus from the Upper Triassic Hammer Creek Formation of the Newark Supergroup in Pennsylvania (USA). It was first identified as a procolophonid parareptile, later as a probable rhynchosaur archosauromorph, and more recently as an indeterminate neodiapsid. Here we revise the anatomy of Sphodrosaurus pennsylvanicus in order to include it for the first time in a quantitative phylogenetic analysis, which is focused on Permo–Triassic neodiapsids. Sphodrosaurus pennsylvanicus is recovered in this analysis as a doswelliid proterochampsian within Archosauromorpha. As a result, this taxon is added to the list of doswelliids known from the Carnian–Norian of the eastern and south-western USA. Previous authors recognized that the most unusual feature of Sphodrosaurus pennsylvanicus is its proportionally very large skull. Phylogenetic generalized least squares regressions confirmed that Sphodrosaurus pennsylvanicus has a larger skull than the vast majority of Permo–Triassic diapsids. Optimization in the phylogeny of the skull width to presacral length ratio shows the most likely scenario is that the extremely broad skull of Sphodrosaurus pennsylvanicus is autapomorphic, but it is not unique among archosauromorphs, being paralleled by hyperodapedontine rhynchosaurs and the proterochampsian Proterochampsa barrionuevoi. Exploration of a morphospace of linear measurements shows that Sphodrosaurus pennsylvanicus shares strong similarities with the probably semi-aquatic Proterochampsa barrionuevoi, suggesting that the former species may have had a similar mode of life. A linear discriminant analysis of ungual functional categories found that the only preserved ungual of Sphodrosaurus pennsylvanicus was suitable for digging or some other way of substrate processing.