Conocybe lactea was examined as part of a larger study on the distribution of amatoxins and phallotoxins in fungi, and the taxonomic relationships between these fungi. As amatoxins are present in the congener C. filaris, the locally abundant C. lactea was examined using HPLC and mass spectroscopy. Amatoxins were not found in C. lactea, but the related phallotoxins were present in small quantities making it the first fungus outside of the genus Amanita in which phallotoxins have been detected. Despite the presence of a related toxin, C. lactea was found not to be taxonomically close to C. filaris. Phylogenetic analyses using nuclear ribosomal RNA genes indicated that North American specimens of C. lactea were conspecific with North American specimens of C. crispa in Conocybe sect. Candidae. European C. crispa was a distinct taxon. The implications of the use of the name C. albipes for these taxa are discussed. Nucleotide data confirmed placement of the sequestrate taxon Gastrocybe lateritia in sect. Candidae, but as a distinct taxon. It is hypothesized that the unique sequestrate morphology of G. lateritia may be caused by a bacterial infection.