Matrix models and population viability analysis (PVA) have become useful tools to understand population attributes and dynamics. Demography analysis gives valuable information for the management of threatened species, and can be used to create action plans for their conservation. PVA is particularly useful in those species with small population sizes difficult to sample. By calculating the individual fate of each member of the population, PVA simulates temporal population changes and estimates extinction risk over a time period. Here we use these models to analyse the population of axolotl Ambystoma mexicanum, which has decreased more than six times within only 5 years. Its natural environment (the Xochimilco aquatic system within Mexico City) has deteriorated significantly in the last decades. The matrix analysis showed large oscillations in the axolotl population growth rate (damping behaviour), which could explain the fast density reduction in only few generations. Younger ages (eggs and larvae) showed the highest sensitivity and elasticity values, suggesting that the lack of food sources such as zooplankton or the increased predation by exotic carp and tilapia are capable to reduce axolotl density. PVA shows low extinction probabilities using laboratory data for younger ages. However, a small reduction in egg or larvae survival rate is capable to increase extinction probabilities to 100% in 20 years. Based on these results, we found that the best strategy to restore the axolotl population is to increase the survival rate of eggs and larvae by restoring the habitat, eradicating introduced fish and improving water quality, rather than implementing a reintroduction programme. © 2007 The Zoological Society of London.