There are multiple hypotheses for the spectacular plant diversity found in deserts. We explore how different factors, including the roles of ecological opportunity and selection, pro- mote diversification and disparification in Encelia, a lineage of woody plants in the deserts of the Americas. Using a nearly complete species-level phylogeny based on double-digest restriction-aided sequencing along with a broad set of phenotypic traits, we estimate divergence times and diversification rates, identify instances of hybridization, quantify trait disparity and assess phe- notypic divergence across environmental gradients. We show that Encelia originated and diversified recently (mid-Pleistocene) and rapidly, with rates comparable to notable adaptive radiations in plants. Encelia probably originated in the hot deserts of North America, with subsequent diversification across steep environmental gra- dients. We uncover multiple instances of gene flow between species. The radiation of Encelia is characterized by fast rates of phenotypic evolution, trait lability and extreme disparity across environments and between species pairs with overlapping geographic ranges. Encelia exemplifies how interspecific gene flow in combination with high trait lability can enable exceptionally fast diversification and disparification across steep environmental gradients.