Sightings of the iconic reds are becoming more frequent in some areas while efforts to control the non-native grey squirrels are growing.
Savings Scotland's Red Squirrels (SSRS) is the largest co- ordinated project to protect the animals and was set up in February 2009.
Mel Tonkin, SSRS project manager, said: "This project is the first strategic approach to red squirrel conservation ever to be attempted in Scotland. By channelling resources to priority areas in our aim to protect red squirrels by halting the spread of grey squirrels, we are making encouraging progress.
"Most exciting … since the start of the project, red squirrel sightings are being reported to us more frequently in some areas, such as Dunkeld, Meigle and Alyth, and red squirrels have also been spotted in other areas, like Stoneywood near Aberdeen, for the first time.
"Another encouraging achievement in the last two years has been our success in setting up networks of local landowners working to control grey squirrels in target zones.
More than 300 landowners are now involved with the project, helping to maintain larger control boundaries and monitor squirrel distribution. SSRS is a partnership project between Scottish Wildlife Trust (SWT), Scottish Natural Heritage, Forestry Commission Scotland, and the Scottish Rural Property and Business Association (SRPBA).
Jonny Hughes, the SWT's director of conservation, said: "This project has forged positive partnerships between land managers and conservationists, so we now have a co-ordinated approach to red squirrel conservation.
"We hope that the partnerships established through this project will provide a lasting legacy and continue to protect red squirrels in these areas."
Scotland is home to over 75 per cent of the 160,000 red squirrels thought to be living in Britain today and is one of the last strongholds for the endangered species.
Grey squirrels were introduced from North America in the late 19th century and the population has grown to 200,000-300,000 in Scotland.
The bigger and more aggressive animals have taken over in many areas by dominating food eaten by both species. They are common in the Central Belt but are also moving into the Borders and Dumfriesshire from England along the M6/M74 corridor.
Areas of north Scotland still have strong red squirrel populations and are as yet unoccupied by greys. Pockets of red populations also still exist in Tayside and Angus, a few areas in Fife, Dumfries and Galloway and the Borders.
Reds are a conservation priority species for Scotland and the UK. They are also under threat from the squirrelpox virus which is fatal to red squirrels but harmless to the grey squirrels which carry and spread it.Grey squirrels migrating north from northern England are bringing squirrelpox to Scotland and the work of RSSS is essential to protect the native reds. A large grey colony is spreading across Aberdeenshire.
Another problem is the fragmentation of habitat where areas of woodland and forestry become segmented and separated by development and changing land-use.
Last year a consultation by SNH showed most people supported grey squirrel control to prevent both further spread of the species.
Endangered species considered too rare to save may avoid extinction if conservation work succeeds in tackling the threats facing them..
A study by researchers in the UK and US raises hopes for the remaining small populations of animals such as the mountain gorilla, Amur (Siberian) tigers and Puerto Rican parrots.
Previous conservation studies suggested 5,000 individuals were needed as a "minimum viable population" in any species to prevent it going extinct, a figure used to guide whether it is worth introducing conservation efforts to try to save them.
But the new study, published in the journal Trends in Ecology and Evolution, said no single "magic" number can be used as a yardstick for whether a species might survive. Instead, the size of the population needed varies between and within species