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The social and ecological conditions that individuals experience during early development have marked effects on their developmental trajectory. In songbirds, brood size is a key environmental factor affecting development, and experimental increases in brood size have been shown to have negative effects on growth, condition and fitness. Possible causes of decreased growth in chicks from enlarged broods are nutritional stress, crowding and increased social competition, i.e. environmental factors known to affect adult steroid levels (especially of testosterone and corticosteroids) in mammals and birds. Little, however, is known about environmental effects on steroid synthesis in nestlings. We addressed this question by following the development of zebra finch (Taeniopygia guttata) chicks that were cross-fostered and raised in different brood sizes. In line with previous findings, nestling growth and cell-mediated immunocompetence were negatively affected by brood size. Moreover, nestling testosterone levels covaried with treatment: plasma testosterone increased with experimental brood size. This result provides experimental evidence that levels of circulating testosterone in nestlings can be influenced by their physiological response to environmental conditions.