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The single closed-neutron-shell, one proton–hole nucleus 207Tl was populated in deep-inelastic collisions of a 208Pb beam with a 208Pb target. The yrast and near-yrast level scheme has been established up to high excitation energy, comprising an octupole phonon state and a large number of core excited states. Based on shell-model calculations, all observed single core excitations were established to arise from the breaking of the N=126 neutron core. While the shell-model calculations correctly predict the ordering of these states, their energies are compressed at high spins. It is concluded that this compression is an intrinsic feature of shell-model calculations using two-body matrix elements developed for the description of two-body states, and that multiple core excitations need to be considered in order to accurately calculate the energy spacings of the predominantly three-quasiparticle states.