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Summary 1 Habitat heterogeneity has important repercussions for species abundance, demography and life-history patterns. While habitat effects have been more thoroughly studied in top-down situations (e.g. in association with predation), their role in bottom-up situations (e.g. in association with food abundance) has been less explored and the underlying mechanism(s) behind the ecological patterns have not commonly been identified. 2 With material from 1993 to 2003, we test the hypothesis that the reproduction of Finnish northern goshawks Accipiter gentilis (L.) is bottom-up limited by habitat composition, especially in situations where the density of their main prey (grouse) is low. Special emphasis was placed on identifying the mechanism(s) behind potential habitat effects. 3 While laying date and large-scale variation in the main prey density (but not habitat composition) were related to the number of eggs goshawks laid, small-scale differences in alternative prey density between different territories later influenced how many young were fledged via the mechanism of habitat-dependent partial-brood loss. As a result of this mechanism, a difference in nestling condition also arose between goshawk territories with differing habitat compositions. 4 As the relative proportions of different landscape elements in a given landscape is a function of large-scale differences in geomorphology and land use, this means that the reproductive performance of goshawks as averaged over larger scales can be understood correctly only in respect to the fact that habitat gradients differ across landscapes. 5 In addition to being one of the first papers identifying the mechanism of partial brood loss as being primarily responsible for the habitat-specific differences in the production of young, this study further illustrates the need to identify small-scale mechanisms to correctly understand the large-scale patterns of reproductive performance in territorial species. The repercussions of the observed habitat effect for local population development are discussed.