Abstract Phylogenomic analysis of large genome-wide sequence data sets can resolve phylogenetic tree topologies for large species groups, help test the accuracy of and improve resolution for earlier multilocus studies and reveal the level of agreement or concordance within partitions of the genome for various tree topologies. Here we used a target-capture approach to sequence 1,088 single-copy exons for more than 200 labrid fishes together with more than 100 outgroup taxa to generate a new data-rich phylogeny for the family Labridae. Our time-calibrated phylogenetic analysis of exon-capture data pushes the root node age of the family Labridae back into the Cretaceous to about 79 Ma years ago. The monotypic Centrogenys vaigiensis, and the order Uranoscopiformes (stargazers) are identified as the sister lineages of Labridae. The phylogenetic relationships among major labrid subfamilies and within these clades were largely congruent with prior analyses of select mitochondrial and nuclear datasets. However, the position of the tribe Cirrhilabrini (fairy and flame wrasses) showed discordance, resolving either as the sister to a crown julidine clade or alternatively sister to a group formed by the labrines, cheilines and scarines. Exploration of this pattern using multiple approaches leads to slightly higher support for this latter hypothesis, highlighting the importance of genome-level data sets for resolving short internodes at key phylogenetic positions in large, economically important groups of coral reef fishes. More broadly, we demonstrate how accounting for sources of biological variability from incomplete lineage sorting and exploring systematic error at conflicting nodes can aid in evaluating alternative phylogenetic hypotheses.