Physiological diversification reflects adaptation for specific environmental challenges. As the major physiological process that provides plants with carbon and energy, photosynthesis is under strong evolutionary selection that gives rise to variability in nearly all parts of the photosynthetic apparatus. Here, we discuss how plants, notably those using C-4 photosynthesis, diversified in response to environmental challenges imposed by declining atmospheric CO2 content in recent geological time. This reduction in atmospheric CO2 increases the rate of photorespiration and reduces photosynthetic efficiency. While plants have evolved numerous mechanisms to compensate for low CO2, the most effective are the carbon concentration mechanisms of C-4, C-2, and CAM photosynthesis; and the pumping of dissolved inorganic carbon, mainly by algae. C-4 photosynthesis enables plants to dominate warm, dry and often salinized habitats, and to colonize areas that are too stressful for most plant groups. Because C-4 lineages generally lack arborescence, they cannot form forests. Hence, where they predominate, C-4 plants create a different landscape than would occur if C-3 plants were to predominate. These landscapes (mostly grasslands and savannahs) present unique selection environments that promoted the diversification of animal guilds able to graze upon the C-4 vegetation. Thus, the rise of C-4 photosynthesis has made a significant contribution to the origin of numerous biomes in the modern biosphere. (C) 2014 Published by Elsevier GmbH.