In communities where strong interspecific competition between native species is lacking, exotic and native species often exhibit intense resource competition resulting in decline of native populations. We examined the potential for interspecific competition for nest sites between co-occurring native Mt. Graham red squirrels (Tamiasciurus hudsonicus grahamensis) and exotic Abert's squirrels (Sciurus aberti) in the Pinaleño Mountains of Arizona. Comparison of nest use between red and Abert's squirrels at different scales (nest, nest tree, and nest site) revealed contrasting results. Competition for nests and nest trees appears unlikely given the dissimilarity in use of nest types and tree characteristics. Abert's squirrels predominately used dreys, whereas red squirrels mostly used cavity nests. Neither squirrel species occupied a nest used by the other species. Nest trees differed in size and species between squirrels for dreys, but not for cavities. Abert's squirrel nest sites were found in a wider range of microhabitats including almost all microhabitats in which red squirrel nest sites were located. Although there was significant overlap, each species showed distinct trends in microhabitat. In general, red squirrel nest sites were characterized as more densely forested areas dominated by corkbark fir (Abies lasiocarpa var. arizonica), whereas Abert's squirrel nest sites were more open and contained greater tree species diversity. Overlap in microhabitat characteristics increases the likelihood of interspecific competition and could increase the vulnerability of red squirrels to extinction.