Some insects construct cocoons in which pupae complete their metamorphosis to adult form. Despite a variety of proposed benefits, the functional significance of the cocoon remains unclear. Here we experimentally examine the functional significance of the cocoon in two species of moth (Gynaephora rossii Curtis and G. groenlandica Wocke, Lepidoptera: Lymantriidae) inhabiting a cold and thermally stressful arctic environment. G. rossii larvae spin a single-layered dark cocoon, and G. groenlandica spin a double-layered pale cocoon, consisting of an inner dark layer and an outer translucent pale layer. Comparisons of developmental times of pupae in cocoons and naked pupae whose cocoons had been experimentally removed revealed that the pale cocoons of G. groenlandica accelerated pupal development substantially. The warming effect of sun was seemingly the principal influence accounting for the enhanced development. In contrast, the presence of a dark cocoon of G. rossii did not accelerate development detectably. To generate hypotheses for why these two closely related species might differ in cocoon type and function, we examined ecological correlates associated with each cocoon type. The experimental results for G. groenlandica provide clear evidence that cocoons enhance a correlate of fitness in insects.