Background: DNA barcoding is a promising tool to facilitate a rapid and unambiguous identification of sponge species. Demosponges of the order Dictyoceratida are particularly challenging to identify, but are of ecological as well as biochemical importance. Methodology/Principal Findings: Here we apply DNA barcoding with the standard CO1-barcoding marker on selected Indo-Pacific specimens of two genera, Ircinia and Psammocinia of the family Irciniidae. We show that the CO1 marker identifies several species new to science, reveals separate radiation patterns of deep-sea Ircinia sponges and indicates dispersal patterns of Psammocinia species. However, some species cannot be unambiguously barcoded by solely this marker due to low evolutionary rates. Conclusions/Significance: We support previous suggestions for a combination of the standard CO1 fragment with an additional fragment for sponge DNA barcoding.