Conservation in fragmented ecosystems, such as grasslands, has historically put more value on larger habitat patches but recent research suggests that small, high-quality habitat patches hold important conservation value. In many grassland systems, Athene cunicularia hypugaea (Western Burrowing Owl) relies on habitat patches created by Cynomys ludovicianus (Black-tailed Prairie Dog; hereafter prairie dog). Prairie dogs create important nesting habitat for A. c. hypugaea and other grassland birds. We examined the effect of size and characteristics of prairie dog colonies on A. c. hypugaea occupancy and reproductive success. We specifically looked at how colony size, prairie dog activity level, and vegetation characteristics influence these population parameters on 175 survey plots throughout eastern Colorado, U.S., across two sample years. Results are based on detections of adult and owlet A. c. hypugaea collected by paired observers traversing transects through study plots during the 2022 and 2023 A. c. hypugaea nesting seasons (May–August). Our top multistate occupancy model indicated that latitude affects A. c. hypugaea occupancy probabilities. Occupancy was higher in southern Colorado compared to northern Colorado. In addition, prairie dog activity was positively associated with A. c. hypugaea reproductive success. Colony size and vegetation characteristics were generally uninformative predictors of A. c. hypugaea occupancy and reproductive success. We compared our results to a previous A. c. hypugaea population assessment conducted within our study area in 2005 and found that active prairie dog colonies positively affected A. c. hypugaea local colonization while local extinction was driven by a transition of active prairie dog colonies to inactive. This study highlights the importance of high-quality prairie dog habitat patches for A. c. hypugaea nesting in fragmented grassland ecosystems, regardless of patch size.