An experiment was conducted to evaluate the effects of sugarcane bagasse (SB) and particle size on broiler performance, gizzard development, ileal microflora, litter quality, and bird welfare under a wet litter challenge model. A total of 672 one-day-old Ross 308 male broilers was allocated to 48 pens using a 2 × 2 × 2 factorial arrangement of treatments with corn particle size—coarse 3,576 μm (CC) or fine 1,113 μm (FC) geometric mean diameter, SB - 0 or 2% and sodium (Na) - 0.16 or 0.40% with increased Na level to induce wet litter. A 3-way particle size × Na × SB interaction (P < 0.05) was observed for weight gain at d 10. Birds fed FC showed a higher weight gain compared to birds fed CC when 0.40% Na without SB diet or 0.16% Na with 2% SB diet was offered. A significant particle size × SB interaction was observed at d 24 on feed conversion ratio (FCR; P < 0.001) and weight gain (P < 0.05). FCR was reduced by 2% SB supplementation in birds fed CC but increased in birds fed FC. Further, weight gain of birds fed 2% SB was higher in birds fed CC but not in those fed FC. On d 35, birds fed 2% SB had a higher weight gain (P < 0.001) compared to those without SB, and a SB × particle size interaction on relative gizzard weight (P < 0.05) and pH (P < 0.05) was present. SB reduced gizzard pH and increased the relative gizzard weight in birds fed the FC diet but not the CC diet (P < 0.05). Counts of ileal Bacillus spp. were increased in birds fed SB (P < 0.05) on d 24. No effects of SB and particle size on litter quality and bird welfare were observed, but higher Na increased litter moisture and footpad dermatitis (FPD) scores (P < 0.001). These findings suggest that SB independently or in combination with CC improves performance in older birds regardless of Na level in diets, possibly through improved gizzard development and gut microflora of birds.