The effects of pen-stocking density and straw processing on the daily behavior traits and hygiene of Holstein dairy heifers housed in a freestall system are not understood. Our objective was to evaluate these factors in a trial with a 2 × 3 factorial arrangement of straw-processing (GOOD or POOR) and pen-stocking-density [100 (CONTROL), 125, or 150% of capacity] treatments. A total of 240 Holstein dairy heifers (410 ± 56.3 kg) were blocked by weight, and assigned to 24 experimental units (pens) with 4 pens/interactive treatment. Heifers were offered (ad-libitum) a TMR diet for 91 d that was comprised of alfalfa haylage, corn silage, and wheat straw; wheat straw was either processed through a 7.5-cm screen (GOOD; 46.0% NDF, 12.9% CP, 60.7% TDN) or not processed (POOR; 46.5% NDF, 12.6% CP, 60.0% TDN) before loading into the TMR mixer. Feed was dispersed at 1000 h daily, and simple pen counts were taken at 1300, 1600, 1900, 2200, 0100, and 0600 h. The percentage of heifers lying in freestalls within overstocked pens was greater than observed for CONTROL at 1900 h (43.0 vs. 31.3%; P < 0.001), but was greater (P ≤ 0.012) for CONTROL at all subsequent evaluation times. Furthermore, the percentage of heifers lying in stalls was greater for the 125% compared with the 150% stocking rate at 0100 (68.8 vs. 61.3%; P = 0.009) and 0600 h (74.0 vs. 63.6%; P < 0.001). Heifers lying in alleys differed only at 0600 h, when overstocked pens were greater than CONTROL (6.8 vs. 0.1%; P < 0.001), and 150% was greater than 125% (9.8 vs. 3.8%; P < 0.001). The percentage of heifers eating differed only at 1900 h for comparisons of overstocked pens with CONTROL (35.0 vs. 43.6%; P < 0.001). Heifers inactively standing were greater (P ≤ 0.005) for overstocked pens at 2200, 0100, and 0600 h, and greater (P ≤ 0.022) at 150% compared with 125% at 0100 and 0600 h. Hygiene scores (1 = clean, 5 = badly soiled) for legs (2.1 to 2.3) and flanks (1.6 to 1.9) indicated heifers stayed acceptably clean, but the within-pen CV for these measures was greater (P ≤ 0.045) for overstocked pens compared with CONTROL, suggesting hygiene scores were more variable without a freestall for each heifer.