Sipuncula, long considered a separate phylum, are now commonly included in the Annelida based on phylogenomic analyses. The sipunculan body consists of an unsegmented trunk and a retractable introvert, usually with a set of tentacles at its anterior end. Unlike other annelids, they have no chaetae, but the introvert is often adorned with proteinaceous hooks that can be important taxonomic characters. Other external taxonomic characters include the tentacles (number, shape and arrangement), body papillae and, in some cases, hardened shields, as well as length ratios. Many species require dissection for correct identification to reveal internal characteristics, such as introvert retractor muscles, nephridia and contractile vessels. Here we summarize the state of the current knowledge of species diversity in sipunculans. We emphasize molecular studies, conducted over the past two decades, that have revealed multiple complexes of cryptic or pseudocryptic species. It has become obvious that diversity is significantly higher than the current taxonomic scheme accounts for, but formal species descriptions are lagging behind. Although the major branches in the sipunculan phylogeny have become increasingly consolidated, the internal relationships within most branches are still in flux.