The major clades of vertebrates differ dramatically in their current species richness, from 2 to more than 32,000 species each, but the causes of this variation remain poorly understood. For example, a previous study noted that vertebrate clades differ in their diversification rates, but did not explain why they differ. Using a time-calibrated phylogeny and phylogenetic comparative methods, I show that most variation in diversification rates among 12 major vertebrate clades has a simple ecological explanation: predominantly terrestrial clades (i.e. birds, mammals, and lizards and snakes) have higher net diversification rates than predominantly aquatic clades (i.e. amphibians, crocodilians, turtles and all fish clades). These differences in diversification rates are then strongly related to patterns of species richness. Habitat may be more important than other potential explanations for richness patterns in vertebrates (such as climate and metabolic rates) and may also help explain patterns of species richness in many other groups of organisms.