Sugarcane mosaic virus (SCMV) is one of the most damaging viruses infecting sugarcane, maize and some other graminaceous species around the world. To investigate the genetic diversity of SCMV in Iran, the coat protein (CP) gene sequences of 23 SCMV isolates from different hosts were determined. The nucleotide sequence identity among Iranian isolates was more than 96%. They shared nucleotide identities of 75.5–99.9% with those of other SCMV isolates available in GenBank, the highest with the Egyptian isolate EGY7-1 (97.5–99.9%). The results of phylogenetic analysis suggested five divergent evolutionary lineages that did not completely reflect the geographical origin or host plant of the isolates. Population genetic analysis revealed greater between-group than within-group evolutionary divergence values, further supporting the results of the phylogenetic analysis. Our results indicated that natural selection might have contributed to the evolution of isolates belonging to the five identified SCMV groups, with infrequent genetic exchanges occurring between them. Phylogenetic analyses and the estimation of genetic distance indicated that Iranian isolates have low genetic diversity. No recombination was found in the CP cistron of Iranian isolates and the CP gene was under negative selection. These findings provide a comprehensive analysis of the population structure and driving forces for the evolution of SCMV with implications for global exchange of sugarcane germplasm. Gene flow, selection and somehow homologous recombination were found to be the important evolutionary factors shaping the genetic structure of SCMV populations.