Within the context of landscape variation in habitat quality, areas of unusually high productivity may serve as refuges for fauna during environmentally stressful periods and as sources of recruitment into less productive areas. In dry landscapes, water availability often defines habitat quality, so that drainages that concentrate run-off can facilitate relatively lush, and sometimes distinct, vegetation communities. The dry box–ironbark forests of south-eastern Australia may be such an ecosystem. Recent clearing of vegetation for agriculture and mining has eliminated 85% of the original vegetation in this area, with the fertile, alluvial soils being most affected. Fragmentation and degradation of remnant forest in this ecosystem has increased the potential importance of the remaining high-quality habitat to conservation. In this study, we tested the hypothesis that the abundance of mammals was higher in moist gullies than on dry hilltops, slopes and ridges in the box–ironbark forests of central Victoria. We compared 57 spatially paired gully and ridge sites. Habitat analyses indicated that gullies had a tree canopy height that was 51% taller than on ridges, 53% more trees with hollows in the upper bole and branches, and almost six times more very large trees. Ridges had 71% more small trees than gullies. Among marsupials surveyed, the common brushtail possum Trichosurus vulpecula and common ringtail possum Pseudocheirus peregrinus were significantly more abundant in gullies. Nearly all the reproduction observed in these two species occurred in gullies. The yellow-footed antechinus Antechinus flavipes was also significantly more abundant in gullies; numbers of the sugar glider Petaurus breviceps differed little. Whereas gullies occupy a very limited total area in this ecosystem, they may nonetheless be critical to some species of mammals that can survive in dry habitats but thrive only in mesic areas. Given the precariously degraded state of the box–ironbark ecosystem as a whole, protection of gullies from proposed alluvial gold mining and timber harvesting could have a disproportionate benefit to biodiversity conservation.