New Guinea has been considered both as a refuge for mesic rainforest-associated lineages that contracted in response to the late Cenozoic aridification of Australia and as a centre of biotic diversification and radiation since the mid-Miocene or earlier. Here, we estimate the diversity and a phylogeny for the Australo-Papuan forest dragons (Sauria: Agamidae; ~20 species) in order to examine the following: (1) whether New Guinea and/or proto-Papuan Islands may have been a biogeographical refuge or a source for diversity in Australia; (2) whether mesic rainforest environments are ancestral to the entire radiation, as may be predicted by the New Guinea refuge hypothesis; and (3) more broadly, how agamid ecological diversity varies across the contrasting environments of Australia and New Guinea. Patterns of lineage distribution and diversity suggest that extinction in Australia, and colonization and radiation on proto-Papuan islands, have both shaped the extant diversity and distribution of forest dragons since the mid-Miocene. The ancestral biome for all Australo-Papuan agamids is ambiguous. Both rainforest and arid-adapted radiations probably started in the early Miocene. However, despite deep-lineage diversity in New Guinea rainforest habitats, overall species and ecological diversity is low when compared with more arid areas, with terrestrial taxa being strikingly absent.