Gigantism and dwarfism evolve in vertebrates restricted to islands. We describe four new species in the Rhinolophus hildebrandtii species-complex of horseshoe bats, whose evolution has entailed adaptive shifts in body size. We postulate that vicissitudes of palaeoenvironments resulted in gigantism and dwarfism in habitat islands fragmented across eastern and southern Africa. Mitochondrial and nuclear DNA sequences recovered two clades of R. hildebrandtii senso lato which are paraphyletic with respect to a third lineage (R. eloquens). Lineages differ by 7.7 to 9.0% in cytochrome b sequences. Clade 1 includes R. hildebrandtii sensu stricto from the east African highlands and three additional vicariants that speciated across an Afromontane archipelago through the Plio-Pleistocene, extending from the Kenyan Highlands through the Eastern Arc, northern Mozambique and the Zambezi Escarpment to the eastern Great Escarpment of South Africa. Clade 2 comprises one species confined to lowland savanna habitats (Mozambique and Zimbabwe). A third clade comprises R. eloquens from East Africa. Speciation within Clade 1 is associated with fixed differences in echolocation call frequency, and cranial shape and size in populations isolated since the late Pliocene (ca 3.74 Mya). Relative to the intermediate-sized savanna population (Clade 2), these island-populations within Clade 1 are characterised by either gigantism (South African eastern Great Escarpment and Mts Mabu and Inago in Mozambique) or dwarfism (Lutope-Ngolangola Gorge, Zimbabwe and Soutpansberg Mountains, South Africa). Sympatry between divergent clades (Clade 1 and Clade 2) at Lutope-Ngolangola Gorge (NW Zimbabwe) is attributed to recent range expansions. We propose an "Allometric Speciation Hypothesis", which attributes the evolution of this species complex of bats to divergence in constant frequency (CF) sonar calls. The origin of species-specific peak frequencies (overall range = 32 to 46 kHz) represents the allometric effect of adaptive divergence in skull size, represented in the evolution of gigantism and dwarfism in habitat islands.