AbstractRecent advances in molecular phylogenetics indicate that the order Chiroptera is monophyletic and that one of four lineages of microbats (Rhinolophoidea) shares a common origin with megabats. Against this background we undertook a comprehensive analysis of placental evolution in bats. We defined a range of characters and character states associated with female reproduction, early development, placentation and the neonate. These were then mapped on a pre‐existing hypothesis of bat relationships that represents the current view from molecular studies. Our purpose was threefold. First, on the assumption of bat monophyly, we wished to establish the stem species pattern of extant chiropterans. Secondly, we asked whether there are derived character conditions in support of a common origin for Rhinolophoidea and the megabats. Thirdly, we looked for evolutionary character transformations that characterize higher‐level clades within Chiroptera, i.e. the megabats and the four lineages of microbats. The character condition occurring in the last common ancestor of Chiroptera was unequivocal for 21 of the 25 characters included in the analysis. The data did not offer support for a megabat‐rhinolophoid clade or the implication that microbats are paraphyletic. However, analysis of early development, placentation and other reproductive parameters resulted in derived character conditions for the megabats as well as for each of the four major lineages of microbats. J. Exp. Zool. (Mol. Dev. Evol.) 310B:428–449, 2008. © 2008 Wiley‐Liss, Inc.