Both the monophyly and inter-relationships of the major annelid groups have remained uncertain, despite intensive research on both morphology and molecular sequences. Morphological cladistic analyses indicate that Annelida is monophyletic and consists of two monophyletic groups, the clitellates and polychaetes, whereas molecular phylogenetic analyses suggest that polychaetes are paraphyletic and that sipunculans are crown-group annelids. Both the monophyly of polychaetes and the placement of sipunculans within annelids are in conflict with the annelid fossil record--the former because Cambrian stem taxa are similar to modern polychaetes in possessing biramous parapodia, suggesting that clitellates are derived from polychaetes; the latter because although fossil sipunculans are known from the Early Cambrian, crown-group annelids do not appear until the latest Cambrian. Here we apply a different data source, the presence versus absence of specific microRNAs--genes that encode approximately 22 nucleotide non-coding regulatory RNAs--to the problem of annelid phylogenetics. We show that annelids are monophyletic with respect to sipunculans, and polychaetes are paraphyletic with respect to the clitellate Lumbricus, conclusions that are consistent with the fossil record. Further, sipunculans resolve as the sister group of the annelids, rooting the annelid tree, and revealing the polarity of the morphological change within this diverse lineage of animals.