Phylogeographical analyses provide information about the role of evolutionary processes underlying species diversity of the Neotropical montains. We used mitochondrial DNA sequence data for the Henicorhina leucophrys complex (Aves: Troglodytidae) from Mexico to Bolivia to describe population structure, infer relationships and divergence times among populations, examine lineage accumulation through time, assess cryptic diversity and explore the origin of elevational and latitudinal replacements of species. The complex comprises numerous lineages, reaching > 12% sequence divergence; most distinct populations are separated by geographical barriers, but several co-occur with elevational segregation or replace each other along the Andes. Some close relatives are separated by vast distances, with more distant relatives occupying intervening areas. The complex is likely to have originated in Mexico and expanded over South America while diversifying constantly into lineages persisting for millions of years. We do not propose taxonomic changes, but H. leucophrys is an outlier among birds in lineage diversity, with > 35 presumptive species identified by coalescent methods. Our work illustrates how diversity accumulates via divergence and persistence in allopatry, achievement of secondary sympatry, and coexistence mediated by ecological divergence. Phases of expansion and contraction of ranges and localized extinctions are likely to account for phylogeographical patterns preceeding speciation and the accumulation of diversity.