The application of modern ecological, ultrastructural and molecular methods, aided by the cultivation of numerous cyanobacterial morphotypes, has substantially changed our knowledge of these organisms. It has led to major advances in cyanobacterial taxonomy and criteria for their phylogenetic classification. Molecular data provide basic criteria for cyanobacterial taxonomy; however, a correct phylogenetic system cannot be constructed without combining genetic data with knowledge from the previous 150 years research of cyanobacterial diversity. Thus, studies of morphological variation in nature, and modern morphological, ultrastructural, ecophysiological and biochemical characters need to be combined in a “polyphasic” approach. Taxonomic concepts for generic and infrageneric ranks are re-evaluated in light of combined phenotypic and molecular criteria. Despite their usefulness in experimental studies, the limitations of using strains from culture collections for systematic and nomenclatural purposes is highlighted. The need for a continual revision of strain identification and proper nomenclatural practice associated with either the bacteriological or botanical codes is emphasized. Recent advances in taxonomy are highlighted in the context of prospects for understanding cyanobacterial diversity from natural habitats, and the evolutionary and adaptational processes that cyanobacteria undergo.