Anecdotal data gathered from many populations suggest that southern flying squirrel (SFS, Glaucomys volans) use of the endangered red-cockaded woodpecker's (RCW, Picoides borealis) nest and roost cavities may negatively affect RCW populations. We conducted a controlled experiment to determine the effects of SFSs on RCW reproductive success. During the 1994 and 1995 breeding seasons, SFSs were removed from 30 RCW clusters and 32 clusters served as controls. SFSs were the most frequently encountered occupants of RCW cavities and used 20–33% of RCW cavities in control and treatment clusters over both years. Treatment groups produced significantly more successful nests (≥ 1 fledgling) than control groups in 1994. In 1995 however, there was no difference in the number of successful nests. In both years, RCW groups nesting in treatment clusters produced significantly more fledglings than groups in control clusters in each of four experimental areas, averaging approximately 0.7 additional fledglings per nesting group. Loss of entire clutches or broods, possibly as a result of predation or abandonment, was a major factor limiting reproduction in control groups in 1994. In contrast, differences in partial brood loss appeared to be the cause of differential fledging success in 1995. Usurpation of RCW roost cavities by SFSs may have placed greater energetic demands on RCWs for cavity defence or thermoregulation, thus reducing energy available for reproduction. Our results show that SFS use of RCW cavities during the breeding season has a significant impact on RCWs and that management of RCW populations should include activities that either minimize SFS populations in RCW clusters or limit access of SFSs to RCW cavities.