For cavity-nesting birds, tree cavities often represent a critical, defendable, and limiting resource that is frequently under intense interspecific competition. However, the dynamics of interspecific conflict resolution, especially between species of similar size, are often unclear. We experimentally tested aggression and nest-defense behaviors in Gouldian Finches (Erythrura gouldiae) and Longtailed Finches (Poephila acuticauda), two sympatric, cavity-nesting estrildid finches that are very similar in size, ecology, and nest-site requirements. Mounted taxidermic models of conspecific and heterospecific nest-site competitors (black and red Gouldian Finch morph and Long-tailed Finch models), as well as a control noncompetitor (Black-chinned Honeyeater [Melithreptus gularis]), were presented to Gouldian and Long-tailed finches. These two competing species differed in their overall responses to simulated intruders and in their relative aggression toward conspecific and heterospecific intruders. Long-tailed Finches reacted more quickly to models, approached closer, and were more likely to attack models (i.e., make physical contact) than Gouldian Finches, which suggests that Long-tailed Finches are intrinsically more aggressive. In addition, Long-tailed Finches were more aggressive toward Gouldian Finches than toward conspecific models. By contrast, Gouldian Finches were more aggressive to conspecific models and avoided approaching Long-tailed Finch models. Male Gouldian Finches were particularly aggressive toward conspecifics, and red head-color morphs were more aggressive than black morphs. These results suggest that the outcomes of competitive asymmetries within and between these species are driven by differences in aggression. Together with the substantial overlap in nest-site use, the Long-tailed Finch's aggressive domination of limited nest sites may lead to competitive exclusion of the endangered Gouldian Finch.