The phylogeny and divergence timing of the Neoavian radiation remain controversial despite recent progress. We analyzed the genomes of 124 species across all Neoavian orders, using data from 25,460 loci spanning four DNA classes, including 5,756 coding sequences, 12,449 conserved nonexonic elements, 4,871 introns, and 2,384 intergenic segments. We conducted a comprehensive sensitivity analysis to account for the heterogeneity across different DNA classes, leading to an optimal tree of Neoaves with high resolution. This phylogeny features a novel Neoavian dichotomy comprising two monophyletic clades: a previously recognized Telluraves (land birds) and a newly circumscribed Aquaterraves (waterbirds and relatives). Molecular dating analyses with 20 fossil calibrations indicate that the diversification of modern birds began in the Late Cretaceous and underwent a constant and steady radiation across the KPg boundary, concurrent with the rise of angiosperms as well as other major Cenozoic animal groups including placental and multituberculate mammals. The KPg catastrophe had a limited impact on avian evolution compared to the Paleocene–Eocene Thermal Maximum, which triggered a rapid diversification of seabirds. Our findings suggest that the evolution of modern birds followed a slow process of gradualism rather than a rapid process of punctuated equilibrium, with limited interruption by the KPg catastrophe. This study places bird evolution into a new context within vertebrates, with ramifications for the evolution of the Earth’s biota.