Legal international trade of wild animals is controversial because some experts speculate that it facilitates illegal domestic trade in source countries. Wild-caught birds are commonly traded as pets, both legally and illegally, for international and domestic markets. We used Peru's native bird trade as a case study to explore the relationship between legal international and illegal domestic trade. Peru's current quota system started in 2001 and is designed to permit limited export of wild-caught birds, while domestic trade is largely prohibited. We surveyed 40 markets in nine cities (March 2007-July 2011), where we examined tabulated government seizure records and export quotas, and compared proportions of native birds with and without quotas in markets and seizures. Sixteen independent variables were evaluated using generalized linear models to explain native bird abundance in the markets and government seizures. We observed a thriving illegal domestic market with 130 native species (n = 35,279 birds) offered for sale; parrots were the most abundant birds. We found no evidence that Peru's current quota system facilitated illegal domestic trade; authorities confiscated birds regardless of their quota status. While the current quota system did not influence market abundance, historic export trade did. Peru's domestic market, and likely other illegal Neotropical bird markets, developed as a consequence of high historic exports, now appears driven, in part, by tradition and which birds harvesters are accustomed to trapping to fullfill domestic demand. Improved enforcement of Peru's wildlife legislation would likely be more effective in decreasing illegal domestic trade than eliminating quotas.