As the grey squirrels increased their range, red squirrels have suffered huge population declines and now exist in just a few pockets around the British Isles.
Conservationists estimate that there are only 211,000 red squirrels left in the UK (with approximately 100,000 in Scotland) compared with more than 2.7 million greys.
While scientists believe the larger and more aggressive grey squirrels have been able to out-compete their red cousins for resources, they believe that a deadly pox that appeared soon after the greys arrived has also been responsible for the catastrophic decline.
Grey squirrels act as a reservoir for squirrel poxvirus - they are able to carry the disease without suffering from any ill effects. But this is not the case for red squirrels.
Tony Sainsbury, from the Institute of Zoology, Zoological Society of London, who is the lead author of the paper, said: "Squirrel pox is almost always fatal in red squirrels.
Grey squirrels carry a deadly virus
"We are not sure exactly how it kills them - we think it must have some sort of effect on the heart or another vital organ because it can kill them very quickly."
He said that the pox was having a devastating effect on red squirrel populations, causing numbers to plummet 25 times faster than in areas where greys did not carry the virus.
David Stapleford, a red squirrel breeder at Pensthorpe Nature Reserve, Norfolk said: "The pox annihilates the red."
But this latest study suggests the reds may be fighting back.
Dr Sainsbury and his colleagues were testing fluid samples taken from 500 squirrels that had been brought to the Institute of Zoology for autopsies between 1993 and 2005 to investigate how the pox was spreading.
This study gives us an idea that there is a good chance of a vaccine working
Tony Sainsbury, ZSL
However, as the team screened them for antibodies to the virus, the researchers discovered something extremely interesting.
He told the BBC: "Up to now, we have never found antibodies to the virus in the red squirrels.
"So it appeared that whenever red squirrels were exposed to the virus, they were getting the disease and dying.
The pox can kill reds within days
"But when we looked at these samples, we found there were eight squirrels that had antibodies to the virus.
"They must have been exposed at some point to the virus, and either didn't develop the disease or developed the disease and managed to fight it."
This, he said, was the first evidence that red squirrels might have some immunity and would be able to counteract the disease.
The team is now planning to look at how widespread this immunity might be and to investigate why and how the red squirrels have been able to develop this ability to resist the pox.
The findings suggest that a vaccine could now be a viable way to save the reds.
Dr Sainsbury said: "While developing a vaccine would take years and a lot of investment, this study gives us an idea that there is a good chance of a vaccine working because we now know that reds can develop immunity.
Population estimated at 211,000 (30k England, 121k Scotland, 10k Wales, 50k N Ireland and Republic of Ireland).
Population estimated at 2.77m (2m England, 0.2m Scotland, 0.32m Wales, 250k N Ireland and Republic of Ireland).
Native to GB, probably introduced to Ireland.
Native to North America, introduced to Britain in 1870s.
Habitat: deciduous and coniferous forests, but coniferous forests may be advantageous.
Wide range of habitats, including broadleaved and conifer forests.
Life expectancy - up to seven years in the wild.
Can live up to nine years in the wild.
Squirrel poxvirus is nearly always fatal to red squirrels.
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