In recent decades, feral horse (Equus caballus; horse) populations increased in sagebrush (Artimesia spp.) ecosystems, especially within the Great Basin, to the point of exceeding maximum appropriate management levels (AMLmax), which were set by land administrators to balance resource use by feral horses, livestock, and wildlife. Concomitantly, greater sage‐grouse (Centrocercus urophasianus; sage‐grouse) are sagebrush obligates that have experienced population declines within these same arid environments as a result of steady and continued loss of seasonal habitats. Although a strong body of research indicates that overabundant populations of horses degrade sagebrush ecosystems, empirical evidence linking horse abundance to sage‐grouse population dynamics is missing. Within a Bayesian framework, we employed state‐space models to estimate population rate of change (λ) using 15 years (2005–2019) of count surveys of male sage‐grouse at traditional breeding grounds (i.e., leks) as a function of horse abundance relative to AMLmax and other environmental covariates (e.g., wildfire, precipitation, % sagebrush cover). Additionally, we employed a post hoc impact‐control design to validate existing AMLmax values as related to sage‐grouse population responses, and to help control for environmental stochasticity and broad‐scale oscillations in sage‐grouse abundance. On average, for every 50% increase in horse abundance over AMLmax, our model predicted an annual decline in sage‐grouse abundance by 2.6%. Horse abundance at or below AMLmax coincided with sage‐grouse λ estimates that were consistent with trends at non‐horse areas elsewhere in the study region. Thus, AMLmax, as a whole, appeared to be set adequately in preventing adverse effects to sage‐grouse populations. Results indicated 76%, 97%, and >99% probability of sage‐grouse population decline relative to controls when horse numbers are 2, 2.5, and ≥3 times over AMLmax, respectively. As of 2019, horse herds exceeded AMLmax in Nevada, USA, by >4 times on average across all horse management areas. If feral horse populations continue to grow at current rates unabated, model projections indicate sage‐grouse populations will be reduced within horse‐occupied areas by >70.0% by 2034 (15‐year projection), on average compared to 21.2% estimated for control sites. A monitoring framework that improves on estimating horse abundance and identifying responses of sage‐grouse and other key indicator species (plant and animal) would be beneficial to guide management decisions that promote co‐occurrence of horses with sensitive wildlife and livestock within landscapes subjected to multiple uses. Published 2021. This article is a U.S. Government work and is in the public domain in the USA. The Journal of Wildlife Management published by Wiley Periodicals LLC on behalf of The Wildlife Society.