More than two-thirds of the terrestrial avifauna of Australia have been reported to use mistletoe as a nest substrate. Despite the prevalence of this behaviour, no previous research has measured nest-site selection relative to mistletoe availability. Thus, no species has been found to preferentially select mistletoe as a nesting substrate. We conducted a comprehensive search of a 365-ha woodland near Holbrook, New South Wales, for Diamond Firetail (Stagonopleura guttata) nests and recorded the nesting substrate. We also quantified the number of mistletoe plants in the study area and estimated their area as a percentage of the total canopy. Although mistletoe conservatively accounted for ~2.3% of the canopy, 13 of 43 (30%) Firetail nests in the study site were in mistletoe. More Firetail nests were found in mistletoe than expected by chance. This finding provides the first evidence for nest-site preference in mistletoe. We predict that nests placed in mistletoe have a selective advantage owing to increased nesting success, although this was not tested in this study, as all nests were inactive. We propose that the dense evergreen foliage of mistletoe provides a good structure for efficient nest building, a favourable microclimate and high levels of nest concealment that may reduce predation risk.