There is little available information on the breeding biology of Southern Bristle-Tyrant. Lowen et al. (1996) reported several pairs that were carrying food or nesting material, suggesting breeding, in eastern Paraguay in late July. In the same region, a pair was observed nest building on 23 September, but the nest was not described. Also in Paraguay, Bertoni (1901) observed a nest under construction in October. Narosky and Salvador (1998) mention a nest with two chicks from Missiones, Argentina, in late August. Nest construction in Brazil is reported from July (São Paulo; Tonetti et al. 2017) and August (Minas Gerais; Lombardi et al. 2010).
The nest is a closed/globular/lateral structure (using the terminology of Simon and Pacheco 2005) that is attached to the trunk of a tree (Bertoni 1901, Narosky and Salvador 1998, Lombardi et al. 2010, Tonetti et al. 2017). The most complete description of the nest is from Tonetti et al. (2017): the nest is globular, with a very short lateral entrance "tunnel" on the upper third portion, pointing 90° in relation to the trunk. This nest had the following dimensions: height above the ground, 1.3 m; nest height (external), 15 cm; nest width (external), 12 cm; nest depth (external), 11 cm; distance from the center of the entrance to the lower end of the nest, 9 cm; width of the nest entrance, 4 cm; and height of the nest entrance, 3 cm. The nest is constructed oflive moss with spider web in the external walls fixing the material, with plumed seeds lining the interior (Bertoni 1901, Narosky and Salvador 1998, Lombardi et al. 2010, Tonetti et al. 2017). The clutch is two (Narosky and Salvador 1998). The egg is white and unmarked; one egg has dimensions of 17.1 x 13.5 mm (Tonetti et al. 2017).