Premise Plants have evolved different ecological strategies in response to environmental challenges, and a higher lability of such strategies is more common in plant groups that adapt to various niches. Crassula (Crassulaceae), occurring in varied mesic to xeric habitats, exhibits a remarkable diversity of life-forms. However, whether any particular life-form trait has shaped species diversification in Crassula has remained unexplored. This study aims to investigate diversification patterns within Crassula and identify potential links to its life-form evolution. Methods A phylogenetic tree of 140 Crassula taxa was reconstructed using plastid and nuclear loci and dated based on the nuclear DNA information only. We reconstructed ancestral life-form characters to estimate the evolutionary trends of ecophysiological change, and subsequently estimated net diversification rates. Multiple diversification models were applied to examine the association between certain life-forms and net diversification rates. Results Our findings confirm a radiation within Crassula in the last 10 million years. A configuration of net diversification rate shifts was detected, which coincides with the emergence of a speciose lineage during the late Miocene. The results of ancestral state reconstruction demonstrate a high lability of life-forms in Crassula, and the trait-dependent diversification analyses revealed that the increased diversification is strongly associated with a compact growth form. Conclusions Transitions between life-forms in Crassula seem to have driven adaptation and shaped diversification of this genus across various habitats. The diversification patterns we inferred are similar to those observed in other major succulent lineages, with the most-speciose clades originating in the late Miocene.