Greater sage‐grouse (Centrocercus urophasianus) is a landscape‐level species that requires large tracts of intact sagebrush (Artemisia spp.). Loss of functional habitat resulting from increased demand for energy generation, transmission, and distribution within greater sage‐grouse habitats in the western United States has the potential to negatively affect this species. We monitored 346 radio‐marked female greater sage‐grouse from 2009 to 2014 to evaluate the potential effects of 27‐m‐tall, 230‐kilovolt (kV) wood‐pole, H‐frame transmission lines on greater sage‐grouse habitat selection and demography. We modeled the effect of the transmission lines in 2 different study areas simultaneously using consistent habitat data. Previous research in our study areas suggested that the effect of transmission lines was potentially confounded by other habitat features. We accounted for these potential confounding effects by estimating habitat suitability before estimating the effect of transmission lines. We combined habitat selection and demography results to estimate habitat function relative to transmission lines and inform management recommendations. Overall, we found evidence that transmission lines had a negative effect on greater sage‐grouse habitat selection and survival within our study areas over 6 years, but the magnitude of this effect varied by habitat suitability and proximity to occupied leks. The effect of transmission lines on habitat function extended 1.0 km from a transmission line in habitats within 3.1 km of an occupied lek compared to 0.50 km from a transmission line in habitats beyond 3.1 km from occupied leks. Based on these results, we suggest future power line placement relative to sage‐grouse nesting, brood‐rearing, and summer habitats consider potential effects to sage‐grouse habitat selection and demography. Effects can be minimized by incorporating design features that discourage avian predator perching and siting power lines in habitats with lower suitability and, in our study area, habitats beyond 3.1 km from occupied leks. © 2019 The Wildlife Society.