A major problem in conservation biology is the extent to which the loss of genetic variability in isolated populations reduces their chance of survival. We present data in which the loss of genetic diversity in small and isolated populations can be directly related to population dynamics. Genetic similarity in red squirrels is inversely correlated with population size. The loss of genetic variation and the lower population densities in isolated populations are both the result of reduced immigration. Our data suggest that population processes rather than genetic problems are the real threat to small squirrel populations.