A previously published molecular phylogenetic analysis of the sandalwood genus, Santalum L. (Santalaceae), identified that the Australian endemic northern sandalwood, S. lanceolatum R.Br., is not monophyletic and contains a distinct, yet cryptic, lineage within it as currently circumscribed. This study examines nuclear ribosomal gene sequences of additional specimens from across its geographic range, and 30 morphological characters, in order to revise the taxonomy of S. lanceolatum sensu lat. (s.l.) and the segregate species that should bear the name S. leptocladum Gand. Santalum lanceolatum sensu stricto (s.s.) is distributed in the humid to subhumid regions of northern Australia north of 20°S latitude, whereas S. leptocladum occurs in the arid and temperate regions of central and southern Australia. Putative interspecific hybrids were discovered in two localities, and may represent either natural or human-mediated hybridisation. The results of this study have major economic and conservation implications because S. lanceolatum s.s., which is known to have higher levels of fragrance compounds than S. leptocladum, has a much more restricted range than previously thought.