Genomic and functional analyses of bacterial sponge symbionts belonging to the uncultivated candidate genus ‘Entotheonella’ has revealed them as the prolific producers of bioactive compounds previously identified from their invertebrate hosts. These studies also suggested ‘Entotheonella’ as the first members of a new candidate phylum, ‘Tectomicrobia’. Here we analyzed the phylogenetic structure and environmental distribution of this as-yet sparsely populated phylum-like lineage. The data show that ‘Entotheonella’ and other ‘Tectomicrobia’ are not restricted to marine habitats but widely distributed among terrestrial locations. The inferred phylogenetic trees suggest several intra-phylum lineages with diverse lifestyles. Of these, the previously described ‘Entotheonella’ lineage can be more accurately divided into at least three different candidate genera with the terrestrial‘CandidatusPrasianella’, the largely terrestrial ‘Candidatus Allonella’, the ‘CandidatusThalassonella’ comprising sponge-associated members, and the more widely distributed‘CandidatusEntotheonella’. Genomic characterization of ‘Thalassonella’ members from a range of sponge hosts did not suggest a role as providers of natural products, despite high genomic similarity to ‘Entotheonella’ regarding primary metabolism and implied lifestyle. In contrast, the analysis revealed a correlation between the revised ‘Entotheonella’ 16S rRNA gene phylogeny and a specific association with sponges and their natural products. This feature might serve as a discovery method to accelerate the identification of new chemically rich ‘Entotheonella’ variants, and led to the identification of the first ‘Entotheonella’ symbiont in a non-tetractinellid sponge,Psammociniasp., indicating a wide host distribution of ‘Entotheonella’-based chemical symbiosis.