Understanding the habitat relationships of rare species is critical to conserving populations and habitats of those species. Nesting habitat is suspected to limit distribution of the threatened Mexican spotted owl (Strix occidentalis lucida), and may vary among geographic regions. We studied selection of nesting habitat by Mexican spotted owls within their home ranges in the Sacramento Mountains, New Mexico. We compared characteristics of owl nest trees and nest sites to characteristics of randomly located trees and sites at 2 spatial scales: the general nest vicinity and within activity centers used by spotted owls. Owls nested primarily in mixed-conifer forest (92%), and most nested in cavities in trees or snags (48%), or in dwarf mistletoe (Arceuthobium spp.) witches' brooms (36%). Owl nest trees had greater levels of dwarf mistletoe infection and were larger in diameter than random trees at both of the evaluated spatial scales. Nest trees also were more likely than random trees to be in white fir (Abies concolor) or Douglas-fir (Pseudotsuga menziesii), and in trees or snags with broken tops. Differences between owl nest sites and random sites differed with the scale at which we selected random sites, but at both scales examined, owl nest sites had greater canopy cover and more basal area contributed by large trees and white fir than random sites. In addition, most nest sites occurred in drainage bottoms or on the lower 2 thirds of north- or east-facing slopes. Conservation of owl nesting habitat in this area will require retaining forest patches with high canopy cover and large trees containing cavities or large dwarf mistletoe witches' brooms. Locating forest management treatments on ridgetops or the upper third of slopes and/or on south- or west-facing slopes may reduce impacts to owl nesting habitat while simultaneously targeting the drier forest types most in need of restoration. 2013 The Wildlife Society.