In a community of ≥3 competing species, one species may also have a positive indirect effect on another by suppressing a third, shared competitor. We examine the potential for similar interactions among Red-cockaded Woodpeckers (Picoides borealis) and two of its cavity kleptoparasites: southern flying squirrels (Glaucomys volans) and Red-bellied Woodpeckers (Melanerpes carolinus). We hypothesized that flying squirrels have a positive indirect effect on Red-cockaded Woodpeckers by suppressing Red-bellied Woodpeckers. We monitored occupancy of Red-cockaded Woodpecker cavities on 16 territories for one year, and then regularly removed flying squirrels from Red-cockaded Woodpecker cavities for one year on eight territories, each paired with a control. We predicted that flying squirrel removal would competitively release Red-bellied Woodpeckers, which in turn would preempt a positive occupancy response by Red-cockaded Woodpeckers. During the removal phase, flying squirrel occupancy decreased 53% on the removal territories relative to controls (0.46 vs. 0.96 cavities occupied per territory), while Red-bellied Woodpecker occupancy increased 46% (1.00 vs. 0.69 cavities per territory). Red-bellied Woodpecker occupancy increased 103% on the removals from July to December of the removal phase, when most Red-cockaded Woodpecker fledglings, potential helpers, and dispersers acquire cavities. Red-cockaded Woodpeckers failed to respond positively to the removals, apparently because Red-bellied Woodpeckers rapidly occupied the evacuated cavities. The results are consistent with the hypothesis that flying squirrels indirectly benefit Red-cockaded Woodpeckers by suppressing Red-bellied Woodpeckers. This indirect effect approximately counterbalanced the direct negative effect of flying squirrels on Red-cockaded Woodpeckers.