In this study we present the first genetic evidence of the phylogenetic position of Tarsius pumilus, the mountain tarsier of Sulawesi, Indonesia. This mysterious primate is the only Eastern tarsier species that occurs exclusively in cloud forests above 1800 m asl. It exhibits striking morphological peculiarities – most prominently its extremely reduced body size, which led to the common name of “pygmy tarsier”. However, our results indicate that T. pumilus is not an aberrant form of a lowland tarsier, but in fact the most basal of all Sulawesi tarsiers. Applying a Bayesian multi-locus coalescent approach we dated the divergence between the T. pumilus lineage and the ancestor of all other extant tarsiers to 9.88 MYA. This is as deep as the split between the two other tarsier genera Carlito (Philippine tarsiers) and Cephalopachus (Western tarsiers), and predates further tarsier diversification on Sulawesi by around 7 million years. The date coincides with the deepening of marine environment between eastern and western Sulawesi, which likely led to allopatric speciation between T. pumilus or its predecessor in the west and the ancestor of all other Sulawesi tarsiers in the east. As the split preceded the emergence of permanent mountains in western Sulawesi, it is unlikely that the shift to montane habitat has driven the formation of the T. pumilus lineage.