Allelic variation at seven hypervariable tri- and tetranucleotide microsatellite loci was used to determine levels of population differentiation between 14 populations of red grouse (Lagopus lagopus scoticus) in northeast Scotland, UK. Despite the potential for long-distance dispersal in grouse, and a semicontinuous habitat, significant population divergence was observed (mean RST = 0.153; P < 0.01) and an isolation-by-distance effect detected (Mantel test: P < 0.001). Examination of the spatial trend in principal component scores derived from allele frequencies among populations highlighted a barrier to gene flow that was confounding a simple isolation-by-distance effect. This barrier corresponded to an area of unsuitable habitat for grouse associated with a river system that bisected the study area. Mean genetic relatedness was higher for males than for females in all but one of the study populations, suggesting that the territorial behaviour and natal philopatry displayed by cocks have a manifold effect in generating the observed spatial genetic structure. Lower female relatedness values suggest a higher level of female-mediated gene flow, which is sufficient to prevent the loss of genetic variation from within populations and the onset of inbreeding effects. The potential consequences of local subdivision for red grouse populations are discussed.