The southern flying squirrel (Glaucomys volans) forms large aggregations inside nest-lined tree cavities to reduce exposure to winter temperatures. We measured oxygen consumption of individuals and grouped flying squirrels in Plexiglas and nest-box chambers in New Hampshire to determine savings provided by huddling and nest construction. Because G. volans breeds during late winter, we also measured energy expenditure of females during gestation and lactation. These data were used to construct daily energy budgets for flying squirrels during winter and to investigate the relationship between this species' cold tolerance and its current distribution. Flying squirrels had lower basal metabolism (0.95 cm3 O2∙g−1∙h−1) and rate of heat loss (0.11 cm3 O2∙g−1∙h−1∙ °C−1) than predicted according to mass. Peak reproductive costs (1 week postparturition) were 170% of nonbreeding requirements. At 9 °C, huddling in groups of three and six reduced energy expenditure by 27 and 36%, respectively. Compared with individuals without nests, nest insulation decreased heat loss by 37% for single squirrels and reduced lower critical temperature from 26.5 to 12.2 °C for groups of six. As estimated from our budget, aggregating reduces winter daily energy expenditure by 26–33%. At the northern range boundary, daily expenditure for squirrels using both aggregations and nests (2.5 times basal metabolism) and for females during peak lactation (3.9 times basal metabolism) was similar to estimates of maximal daily energy expenditure in the literature. We speculate that additional thermoregulatory costs and the decreased abundance of hard mast for winter caches prevent G. volans from occupying areas north of its current distribution.