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Animals in hot desert environments often show marked fluctuations in population size, persisting in low numbers in refuge habitats during dry periods and expanding after rain when resources increase. Understanding drought‐wet cycle dynamics is important for managing arid ecosystems, particularly if populations of threatened species are present. Such species may face increased risks of extinction if all populations decrease synchronously toward zero during low‐resource periods, and if key refuge habitats needed during these periods are disturbed or unavailable. Here, we describe the dynamics and habitat requirements of two sub‐populations of the kowari, Dasyuroides byrnei (Marsupialia: Dasyuridae), during long‐term sampling (2000–2015) that encompassed multiple drought‐wet cycles. This species is listed currently as Vulnerable on the IUCN Red List. We found that the study region contains favourable habitat, with kowari occurring on hard stony (gibber) pavements in association with coverage of sand that may facilitate construction of burrows. Both sub‐populations of kowari declined over the study period irrespective of climatic conditions, despite some evidence that both body condition and reproductive output increased after rain. We suggest that the studied sub‐populations are under stress from extrinsic rather than intrinsic factors, with livestock grazing and introduced predators perhaps having the most negative effects. If similar demographic trends are apparent elsewhere in the species’ small geographical range, the species would be eligible for listing on the IUCN Red List as Endangered, with a 20% chance of extinction within the next 20 years. Urgent research is required to quantify and mitigate the extrinsic threats to kowari populations. Proactive measures such as captive breeding to act as insurance populations would be prudent.