The subfamily Platycraninae Brunner v. Wattenwyl, 1893 is polyphyletic in the traditional treatment. None of the genera attributed to the subfamily is closely related to the type-genus Platycrana Gray, 1835, which has already been suggested by morphological studies. The main key feature of Platycraninae traditionally used to characterize the subfamily, the remarkably large head and strongly enlarged genae ("cheeks"), is not true for Platycrana. Consequently, all other genera, the true "Palm Stick Insects" need to be removed from Platycraninae and are here accommodated in Megacraniinae subfam. nov.. Megacrania Kaup, 1871 is chosen as the type-genus of this new subfamily, because the name very well describes the main characteristic of this clade. Previous molecular studies have shown Megacraniinae subfam. nov. to be a member of the Old World family Phasmatidae s. str. (= Lanceocercata Bradler, 2001), which is characterized by the enlarged, laterally flattened and foliaceous or lanceolate cerci and by the male anal segment longitudinally split into two movable, interiorly dentate hemi-tergites that serve as a clasping apparatus to grasp the female abdomen during copulation and makes lacking a vomer. Neither character is true for Platycrana and Platycraninae sensu nov. respectively. Molecular studies have revealed Platycraninae sensu novo as the sister group of Phasmatidae s. str. (= Lanceocercata). The tribe Stephanacridini Günther, which has previously been without a subfamilar affiliation is transferred as a subordinate taxon of Platycraninae sensu novo. Platycraninae is characterized and distinguished from Phasmatidae s. str. (= Lanceocercata) by the small cylindrical cerci, simple anal segment and presence of a vomer in males, as well as the strongly keeled subgenital plate and remarkably elongated, filiform gonapophysis VIII of females, which greatly project over the apex of the abdomen. Characterizations are presented for Megacraniinae subfam. nov. as well as Platycraninae sensu nov. and its two tribes Platycranini and Stephanacridini. Lists of genera are provided for the three taxa. Three genera are removed from Platycraninae and Megacraniinae subfam. nov.: The Australian Echetlus Stål, 1875 is transferred to Phasmatinae: Acanthomimini and Redtenbacherus Özdikmen Darilmaz, 2008 and Elicius Günther, 1935 are transferred to Lonchodidae: Necrosciinae. The male of Megacrania spina Hsiung, 2007 as well as the eggs of Megacrania brocki Hsiung, 2002, Erastus apalamnus Rehn, 1904, Ophicrania apterus (Redtenbacher, 1908), Ophicrania nigroplagiatus (Redtenbacher, 1908), Platycrana viridana (Olivier, 1792) and Macrophasma lyratus (Redtenbacher, 1908) are illustrated for the first time. Xenomaches moderata (Kirby, 1884) from the island of Ambon is synonymised with Platycrana viridana (Olivier, 1792) (syn. nov.).