Natural populations of the endangered western barred bandicoot (Perameles bougainville) now exist on only two islands in Shark Bay, Western Australia. Our aim was to investigate genetic diversity in natural, reintroduced, and captive populations of the bandicoots and to assess the extent of divergence between the populations. The contemporary isolation of the natural populations has resulted in heterogeneity of allele frequency between the islands, which has acted to maintain a higher combined diversity than would be expected from either population on its own. These findings highlight how remnant island populations can act as genetic reservoirs to maximize diversity for reintroductions into a species former range. Although diversity is high between island populations, diversity within populations, based on six microsatellite loci, are amongst the lowest ever recorded for populations of marsupials. The mtDNA sequence data indicate that the two remaining natural populations show only minor divergence from each other, with the five haplotypes separated by just single base pairs. The reintroduced population and captive colonies show evidence for the loss of diversity related to genetic drift operating on small isolated populations.