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The Insular Celtic hypothesis concerns the origin of the Celtic languages. The six Celtic languages of modern times can be divided into:

• the Goidelic languages (Irish, Manx, and Scottish Gaelic); and
• the Brythonic languages (Breton, Cornish and Welsh).

The term "Insular" refers to the place of origin of these languages, the British Isles, in contrast to the (now extinct) Continental Celtic languages of mainland Europe and Anatolia. There is a theory that the Brythonic and Goidelic languages evolved together in those islands, having a common ancestor more recent than any shared with the Continental Celtic languages such as Celtiberian, Gaulish, Galatian and Lepontic, among others, all of which are long extinct.

The proponents of the Insular Celtic hypothesis (such as Cowgill 1975; McCone 1991, 1992; and Schrijver 1995) point to shared innovations among Insular Celtic languages, including inflected prepositions, shared use of certain verbal particles, VSO word order, and the differentiation of absolute and conjunct verb endings as found extensively in Old Irish and to a small extent in Middle Welsh (see Proto-Celtic language#Morphology). They assert that a partition that lumps the Brythonic languages and Gaulish (P-Celtic) on one side and the Goidelic languages with Celtiberian (Q-Celtic) on the other may be a superficial one (i.e. owing to a language contact phenomenon), as the identical sound shift (Q to P) could have occurred independently in the predecessors of Gaulish and Brythonic.

The family tree of the Insular Celtic languages is thus as follows:

• Insular Celtic
  • Goidelic
    • Primitive Irish, ancestral to:
      • Old Irish, ancestral to:
        • Middle Irish, ancestral to:
          • Irish
          • Scottish Gaelic
          • Manx
  • Brythonic
    • Pictish (possibly)
    • British
      • Cumbric (extinct)
      • Old Welsh, ancestral to
        • Middle Welsh, ancestral to:
          • Welsh
      • Southwestern Brythonic, ancestral to:
        • Breton
        • Cornish

• Cowgill, Warren (1975). "The origins of the Insular Celtic conjunct and absolute verbal endings", in H. Rix (ed.): Flexion und Wortbildung: Akten der V. Fachtagung der Indogermanischen Gesellschaft, Regensburg, 9.–14. September 1973. Wiesbaden: Reichert, 40–70. ISBN 3-920153-40-5. 
• McCone, Kim (1991). "The PIE stops and syllabic nasals in Celtic". Studia Celtica Japonica 4: 37–69. 
• McCone, Kim (1992). "Relative Chronologie: Keltisch", in R. Beekes, A. Lubotsky, and J. Weitenberg (eds.): Rekonstruktion und relative Chronologie: Akten Der VIII. Fachtagung Der Indogermanischen Gesellschaft, Leiden, 31. August–4. September 1987. Institut für Sprachwissenschaft der Universität Innsbruck, 12–39. ISBN 3-85124-613-6. 
• Schrijver, Peter (1995). Studies in British Celtic historical phonology. Amsterdam: Rodopi. ISBN 90-5183-820-4.