In the mid-1990s commercial Tasmanian blue gum (Eucalyptus globulus) plantations were established in south-west Western Australia. We examined the extent of loss of potential nesting trees for an endangered obligate hollow-nesting cockatoo, Muir’s corella (Cacatua pastinator pastinator), resulting from establishment of these plantations during 1995–2004. Clearing of native vegetation was extensive in both Tonebridge (51%) and Frankland (76%) study sites. The proportion of land used for timber plantation increased significantly from 2.4% to 12.1% (Tonebridge) and 0.5% to 9% (Frankland) in the period 1995–2004. Plantations were predominantly established on already cleared farmland, but during the rapid development of plantations, large numbers of remnant paddock trees (mean = 56%) in cleared farmland were removed. Despite the loss of more than 50% of potential nesting habitat over an area of 376 km2 within its current distribution, Muir’s corella continued to increase in numbers. However, there are concerns about delayed impacts of the clearing of potential nest trees we have observed, and consequences of further tree loss during future plantation harvesting. Evidence-based demonstration of biodiversity protection is increasingly needed to fulfil forest and plantation stewardship requirements, so greater care needs to be directed towards the management of extant remnant vegetation in paddocks.