Deciphering the evolutionary relationships of Chelicerata (arachnids, horseshoe crabs, and allied taxa) has proven notoriously difficult, due to their ancient rapid radiation and the incidence of elevated evolutionary rates in several lineages. Although conflicting hypotheses prevail in morphological and molecular data sets alike, the monophyly of Arachnida is nearly universally accepted, despite historical lack of support in molecular data sets. Some phylotranscriptomic analyses have recovered arachnid monophyly, but these did not sample all living orders, whereas analyses including all orders have failed to recover Arachnida. To understand this conflict, we assembled a data set of 506 high-quality genomes and transcriptomes, sampling all living orders of Chelicerata with high occupancy and rigorous approaches to orthology inference. Our analyses consistently recovered the nested placement of horseshoe crabs within a paraphyletic Arachnida. This result was insensitive to variation in evolutionary rates of genes, complexity of the substitution models, and alternative algorithmic approaches to species tree inference. Investigation of sources of systematic bias showed that genes and sites that recover arachnid monophyly are enriched in noise and exhibit low information content. To test the impact of morphological data, we generated a 514-taxon morphological data matrix of extant and fossil Chelicerata, analyzed in tandem with the molecular matrix. Combined analyses recovered the clade Merostomata (the marine orders Xiphosura, Eurypterida, and Chasmataspidida), but merostomates appeared nested within Arachnida. Our results suggest that morphological convergence resulting from adaptations to life in terrestrial habitats has driven the historical perception of arachnid monophyly, paralleling the history of numerous other invertebrate terrestrial groups.