Fish have radiated to exploit diverse habitats, but little is known about the evolutionary lability and directionality of associated physiological specialization. Killifish of the genus Fundulus present a compelling system to explore the evolution of osmotic tolerance because closely related species have evolved to occupy most osmotic niches, and physiological osmotic tolerance data are available for most species. This study seeks to determine the number of times, and the rate at which, alternate osmotic tolerance physiologies have evolved, and to determine the directionality of physiological transitions, by mapping comparative physiology data to a molecular phylogeny for the genus. Character mapping and phylogeographic inference indicate that freshwater tolerance is derived, can evolve rapidly, has evolved several times within the genus, and that variation in osmotic tolerance contributes to defining species distributions. The derivation of alternate physiologies within Fundulus appears associated with contraction of physiological plasticity rather than shifts in tolerance ranges, and the degree of contraction is surprisingly similar across convergent physiological types. The rate of physiological transition is relatively high within Fundulus compared to other taxa, but directionality from high salt tolerance to intolerance appears to be the rule. Together, these comparative physiology and phylogenetic data yield insight into the patterns of evolution of ecological specialization.