Along tropical mountains, species often occupy narrow altitude ranges. Numerous biotic and abiotic factors have been proposed as determinants of altitude occupancy. We measured several aspects of thermal physiology of 215 bird species across a 2·6-km altitude gradient in the Peruvian Andes. We predicted that highland species would show adaptation to the colder high-altitude climate and that energy costs of thermoregulation might limit upslope dispersal of lowland natives. We found reductions in thermal conductance, body temperature and lower critical temperature in highland birds compared with lowland species. These combine to make highland natives more resistant to heat loss. We did not find convincing evidence that acute thermal limits or energy costs of thermoregulation constrained altitude distributions. Heat-budget models predicted low-to-moderate long-term costs at native altitudes. Costs increased for lowland natives modelled in the highland climate, but for all but a few species, costs remained within putative expenditure limits. Although we did not test heat tolerances, we measured all species at temperatures similar to the hottest air temperatures at the lowland site. There was no evidence that high lowland temperatures preclude downslope movements of highland birds. While thermal tolerances probably do not directly determine altitude occupancy by most species, the additional energy cost of thermoregulation experienced by lowland species moving upslope may trade off against investment in important life-history components such as breeding, and thereby affect altitude range limits.