Genome size in mammals and birds shows remarkably little interspecific variation compared to other taxa. Yet, genome sequencing has revealed that many mammal and bird lineages have experienced differential rates of transposable element (TE) accumulation, which would be predicted to cause substantial variation in genome size between species. Thus, we hypothesize that there has been co-variation between the amount of DNA gained by transposition and lost by deletion during mammal and avian evolution, resulting in genome size homeostasis. To test this model, we develop a computational pipeline to quantify the amount of DNA gained by TE expansion and lost by deletion over the last 100 million years (My) in the lineages of 10 species of eutherian mammals and 24 species of birds. The results reveal extensive variation in the amount of DNA gained via lineage-specific transposition, but that DNA loss counteracted this expansion to various extent across lineages. Our analysis of the rate and size spectrum of deletion events implies that DNA removal in both mammals and birds has proceeded mostly through large segmental deletions (>10 kb). These findings support a unified 'accordion' model of genome size evolution in eukaryotes whereby DNA loss counteracting TE expansion is a major determinant of genome size. Furthermore, we propose that extensive DNA loss, and not necessarily a dearth of TE activity, has been the primary force maintaining the greater genomic compaction of flying birds and bats relative to their flightless relatives.