Capercaillie numbers in Scotland are declining rapidly and it is accepted that improved habitat management would make a key contribution to any future recovery. In order to do this, managers of commercial forests need to consider the trade-offs between timber production and improved habitat for capercaillie. This research involves the development of a decision tool that uses optimisation methods to systematically investigate this issue. A model that links forest sub-compartment (management unit) characteristics to capercaillie habitat suitability was constructed. Eleven experts evaluated 32 images representing pre-defined forest habitat types. These habitat types were derived using only data available from Forest Enterprise forest inventories and yield models, therefore, they may be predicted directly for any similarly inventoried forest. The Delphi process allowed the experts to reach a consensus regarding the area dependent habitat suitability functions for each habitat type. Following a field validation of the model, the functions were incorporated in a GIS based forest inventory. This allows capercaillie habitat suitability to be calculated for each sub-compartment in a forest. A spreadsheet model was then developed to calculate the timber volume per hectare for possible alternative silvicultural regimes for each sub-compartment. A linear programme then selects the harvesting options for each sub-compartment that return the highest possible score for the forest, five years post management, whilst still meeting specified timer output requirements for the current five year planning period. Two forests representing a conservation forest (Glenmore) and a commercial forest (Inshriach) were selected for case studies. When applied to a range of management scenarios, the model dramatically enhanced habitat suitability whilst allowing timber output targets to be achieved. Various output data, including names of practical use to forest managers are presented.