The ∼50 million-year-old fungus-farming ant mutualism is a classic example of coevolution, involving ants that subsist on asexual, fungal biomass, in turn propagating the fungus clonally through nest-to-nest transmission. Most mutualistic ants cultivate two closely related groups of gilled mushrooms, whereas one small group of ants in the genus Apterostigma cultivates a distantly related lineage comprised of the G2 and G4 groups. The G2 and G4 fungi were previously shown to form a monophyletic group sister to the thread-like coral mushroom family Pterulaceae. Here, we identify an enigmatic coral mushroom that produces both fertile and sterile fruiting structures as the closest free-living relative of the G4 fungi, challenging the monophyly of the Apterostigma-cultivated fungi for the first time. Both nonparametric bootstrap and Bayesian posterior probability support the node leading to the G4 cultivars and a free-living Pterula mushroom. These data suggest three scenarios that contradict the hypothesis of strict coevolution: (1) multiple domestications, (2) escape from domestication, (3) selection of single cultivar lineages from an ancestral mixed-fungus garden. These results illustrate how incomplete phylogenies for coevolved symbionts impede our understanding of the patterns and processes of coevolution.