Recent insect infestations in the spruce-fir forest in the Pinaleno Mountains of southeastern Arizona provided an opportunity to document response to severe forest disturbance and existence of an ecological trap for an endemic montane isolate, the endangered Mt. Graham red squirrel (Tamiasciurus hudsonicus grahamensis). From September 2003 to December 2005 we assessed habitat selection and home range dynamics, and monitored potential correlates of fitness (body mass, reproduction, survivorship) in red squirrels living in insect-damaged forest, while drawing comparisons to squirrels inhabiting undamaged mixed-conifer forest. Although Mt. Graham red squirrels demonstrate equal-preference for habitat within insect-damaged forests and reproduce as well as individuals in undamaged forest, poor survivorship and reduced potential to reproduce suggest insect-damaged forest may function as an ecological trap. In addition, areas selected within insect-damaged forest had <69% dead trees, suggesting an upper limit to the extent of tree mortality tolerated by red squirrels. Habitat selection and sensitivity to disturbance will influence use of insect-damaged areas by forest-dwelling species. Although insect-damaged forest may retain habitat patches for a few individuals, low survivorship may generate an ecological trap.