Bird nests are essential structures that directly determine the fitness of an organism. While there is theory and evidence predicting an association between species nest traits and their habitat, few studies have comprehensively examined the macroevolutionary patterns driving nest evolution, species niche and their interrelation. Using information on 3174 species of songbirds, we show that species that build domed nests (i.e. nests with a roof) have smaller ranges, narrower thermal niches, are less likely to colonise urban environments and have potentially higher extinction rates compared to species that build open nests. Moreover, we show that these macroevolutionary patterns could be driven by the higher energetic demands when building domed nests, which consumes more time and might restrict breeding opportunities. These diverse strands of evidence suggest that the transition from domed to open nests in passerines represents an important evolutionary innovation behind the success of the largest radiation of birds.