The physiological impacts and fitness costs of parasitism by an introduced ectoparasitic fly, Philornis downsi (Muscidae), were studied in nestlings of Darwin's Small Ground Finch, Geospiza fuliginosa (Geospizinae), on the Galápagos Archipelago. Whole blood haemoglobin (Hb) concentration was used to measure host response to ectoparasitism due to its high repeatability and validity, as well as for its key role in aerobic activities that affect fitness, such as flight capacity and nestling begging intensity. Increased numbers of ectoparasitic larvae of P. downsi were strongly correlated with lower Hb levels in nestlings in the absence of blood parasites. Furthermore, immature red blood cell counts were negatively correlated with Hb level and positively correlated with P. downsi intensity. Nestlings with high levels of parasitism suffered higher mortality, which varied with clutch size. Our results provide evidence that endemic Galápagos bird populations are physiologically compromised by P. downsi and experience substantial fitness costs due to ectoparasitism.