Clavicipitoid fungi comprise three families, namely Clavicipitaceae, Cordycipitaceae, and Ophiocordycipitaceae. They are found worldwide and are specialized pathogens of invertebrate, plant and fungal hosts. Over the last decade, morphology- and phylogeny-based studies on clavicipitoid fungi have increased. The latter have revealed that Polycephalomyces, Perennicordyceps and Pleurocordyceps consistently cluster together. These genera are currently considered as members of Ophiocordycipitaceae. Nonetheless, information with regard to their diversity and ecology remains sparse. To fill this gap, we collected 29 fresh specimens from insect and fungal substrates from tropical and subtropical evergreen forests in Thailand and southwestern China. We performed detailed morphological analyses and constructed photoplates for all isolated fungi. We used extensive taxon sampling and a dataset comprising internal transcribed spacer gene region (ITS), small subunit ribosomal RNA gene region (SSU), large subunit rRNA gene region (LSU), translation elongation factor 1-alpha gene region (TEF-1α), RNA polymerase II largest subunit gene region (RPB1) and RNA polymerase II second largest subunit (RPB2) to infer order-, family and genus-level phylogenetic trees. Based on these biphasic analyses, we segregate Polycephalomyces, Perennicordyceps, and Pleurocordyceps from Ophiocordycipitaceae and introduce the new family Polycephalomycetaceae to accomodate these three genera. The majority of species in this family have a vast range of insect and fungal hosts. The sexual morph of Polycephalomycetaceae has stromatic ascomata, long stipes, thick peridium, and cylindrical secondary spores. The asexual morph is characterized by colonies on the host surface or synnemata with stipes on the host, one or two types of phialides, and cylindrical to fusiform conidia. We expand the number of taxa in the new family by introducing seven new species (Polycephalomyces albiramus, Perennicordyceps lutea, Pleurocordyceps parvicapitata, Pleurocordyceps lanceolatus, Pleurocordyceps nutansis, Pleurocordyceps heilongtanensis, Pleurocordyceps vitellina), nine new hosts, and one new combination (Perennicordyceps elaphomyceticola). The results herein hint at a high level of diversity for Polycephalomycetaceae. Future investigations focusing on obtaining additional collections and specimens from different geographical areas would help to reveal not only the extent of the group’s diversity, but also resolve its deeper phylogenetic placement.