The origins of South America's domestic alpaca and llama remain controversial due to hybridization, near extirpation during the Spanish conquest and difficulties in archaeological interpretation. Traditionally, the ancestry of both forms is attributed to the guanaco, while the vicuña is assumed never to have been domesticated. Recent research has, however, linked the alpaca to the vicuña, dating domestication to 6000–7000 years before present in the Peruvian Andes. Here, we examine in detail the genetic relationships between the South American camelids in order to determine the origins of the domestic forms, using mitochondrial (mt) and microsatellite DNA. MtDNA analysis places 80% of llama and alpaca sequences in the guanaco lineage, with those possessing vicuña mtDNA being nearly all alpaca or alpaca–vicuña hybrids. We also examined four microsatellites in wild known–provenance vicuña and guanaco, including two loci with non–overlapping allele size ranges in the wild species. In contrast to the mtDNA, these markers show high genetic similarity between alpaca and vicuña, and between llama and guanaco, although bidirectional hybridization is also revealed. Finally, combined marker analysis on a subset of samples confirms the microsatellite interpretation and suggests that the alpaca is descended from the vicuña, and should be reclassified as Vicugna pacos. This result has major implications for the future management of wild and domestic camelids in South America.