The Eastern Arc Mountains of Tanzania and Kenya, a montane archipelago of 13 uplifted fault blocks (sky islands) isolated by lowland arid savanna, are a center of exceptional biological endemism. Under the influence of humid winds from the Indian Ocean, forests and associated species may have persisted in this region since the final uplift of these blocks in the late Miocene. Today, these mountains are inhabited by a remarkable diversity of bird species. To better understand the evolutionary processes behind this diversity, we combined molecular phylogenetic studies of East African montane birds with paleoclimate modeling of its montane forests. Across its largest lowland barrier, the 125 km between the Usambara and Nguru/Nguu Mountains, 10 of the 14 bird lineages exhibited a phylogeographic break. Using Bayesian methods, we established that at least three periods of forest contraction and expansion affected the diversification of Eastern Arc birds. Habitat distribution models suggest that lower-elevation hills may have acted as stepping-stones connecting isolated highlands to allow for the dispersal of montane forest-dependent species across them. Periods of vicariance during paleoclimatic cycles extending back through the Last Glacial Maximum would have then isolated these populations within the highlands they had reached. The broad distribution of neoendemic species across the mountains of East Africa provides evidence of climate cycling as a driver of lineage diversification. The high incidence of narrow-range endemism of paleoendemic species on the Usambara, Uluguru, and Udzungwa Mountains of this region is harder to explain. Our paleoclimate models retrodicted the persistence of montane forest during climate cycles on several Eastern Arc sky islands but not on the Southern Tanzania Volcanic Highlands. Consistent with recent theoretical work, different rates of local extinction rather than increased rates of lineage diversification may explain the pattern of excessive narrow-range endemism on some sky islands over others. Thus, a regional filtering effect is generated, with paleoendemics maintaining populations through time only in areas where habitat persisted, providing a credible explanation for the dramatic variance in levels of endemism among different East African sky islands.