The need to treat millions of acres in the western United States for fire hazard and ecosystem restoration has been identified as a high priority by the USDA Forest Service. These treatments may require removing increased volumes of timber- including small-diameter trees - from National Forests and other ownerships. The goal of this research was to provide estimates of the forest products industry's capacity to utilize trees of various sizes from the USDA Forest Service Region 1 timber-processing area. The major sources of industry timber-processing capacity data were surveys and telephone interviews with mill managers. Within the USDA Forest Service Region 1 timber-processing area, there were 298 timber-processing facilities in operation as of August 30, 2003: 110 sawmills, 101 house log /log home facilities, 42 post and small pole producers, 23 manufacturers of log furniture, 12 cedar products producers, 7 plywood and veneer plants, and 3 utility pole producers. Annual capacity to process timber within the timber-processing area was 576 million cubic feet (16.3 million cubic meters) excluding pulpwood. Mills utilized 79 percent of their capacity during the 12 months prior to August 30, 2003. Over 91 percent of the timber processed was from trees ≥ 10 inches (25.4 cm) in diameter at breast height (DBH), slightly more than 7 percent from trees 7- to 9.9-inches (17.8 to 25.1-cm) DBH, and only 1 percent from trees<7-inches(17.8cm)DBH. More than 71 percent of the industry capacity could not operate efficiently on trees < 10-inches (25.4 cm) DBH, and only 2 percent of the capacity could utilize trees < 7-inches (17.8 cm) DBH.