Owls are important contributors to the Tertiary small-vertebrate fossil record. They concentrate small-vertebrate remains by producing pellets rich in skeletal material that provide a sample of the small-vertebrate fauna of an area. A common assumption is that different predators inflict unique fragmentation and skeletal element representation signatures, thus providing a method for identifying a field assemblage as pellet derived, and possibly identifying the predator. In addition to the digestive process of pellet formation, the taphonomic history of a pellet includes the post-regurgitation processes of weathering, disintegration, transport, and burial, all of which can introduce biases into an assemblage and confound paleoecological interpretation. Analysis of a modern accumulation of small-vertebrate remains from Great Horned Owl (Bubo virginianus) pellets in a temperate forest environment on San Juan Island, Washington, reveals that fragmentation and skeletal-element representation change with residence time on the forest floor as pellets disintegrate and skeletal elements become dispersed. Matted hair initially protects the skeletal elements. As the pellet breaks down, the bones become dispersed, fragmentation of the bones increases (from 99% intact bones in intact pellets to 75% intact bones in fully dispersed pellets), and small, fragile skeletal elements are lost, resulting in a residual concentration of larger, more robust skeletal elements. The spatial distribution of skeletal elements below the roosting site follows a right-skewed, bimodal pattern. Skeletal elements are preserved in the soil to a depth of three centimeters. Post-regurgitation processes have the potential to distort the original faunal and skeletal composition of pellet-derived assemblages, thus masking any original predator-specific signatures. Actualistic taphonomic studies are necessary in order to understand how well pellet-derived assemblages capture information on local ecological and environmental conditions. This is a critical question that must be addressed to enable correction for such biases before pellet-derived assemblages are used for assessment of small-vertebrate community change and paleoenvironmental reconstruction.