A very localized endemic species, confined to isolated pockets of Afroalpine grasslands and heathlands where they prey on Afroalpine rodents. Suitable habitats extend from above treeline at about 3,200 m up to 4,500 m, with some wolves present in montane grasslands at 3,000 m. However, subsistence agriculture extends up to 3,500–3,800 m in many areas, restricting wolves to higher ranges (Marino 2003a). Rainfall at high altitude varies between 1,000 and 2,000 mm/year, with one pronounced dry period from December to February/March.

Wolves utilize all Afroalpine habitats, but prefer open areas with short herbaceous and grassland communities where rodents are most abundant, along flat or gently sloping areas with deep soils and poor drainage in parts. Prime habitats in the Bale Mountains are characterized by short herbs (Alchemilla spp.) and grasses and low vegetation cover, a community maintained in continuous succession as a result of molerat (Tachyoryctes macrocephalus) burrowing activity. Other good habitats include tussock grasslands (Festuca spp., Agrostis spp.), high-altitude scrubs dominated by Helichrysum spp. and short grasslands in shallow soils. In northern parts of the range, plant communities characterized by a matrix of 'guassa' tussock grasses (Festuca spp.), 'cherenfi' bushes (Euryops pinifolius) and giant lobelias (Lobelia rhynchopetalum) sustain high rodent abundance and are preferred by wolves. Ericaceous moorlands (Erica and Phillipia spp.) at 3,200–3,600 m are of marginal value, with open moorlands having patches of herbs and grasses which are relatively good habitat.

Endemic to the Ethiopian highlands, above the tree line at about 3,200 m. There are no recent records of the species at altitudes below 3,000 m, although specimens were collected at 2,500 m from Gojjam and north-western Shoa at the beginning of the century (references in Yalden et al. 1980). Reported in the Simien Mountains since the species was first described in 1835, but scattered and irregular sightings suggest numbers have been declining. Reported on the Gojjam plateau until the early 1900s (Powell-Cotton 1902, Maydon 1932). South of the Rift Valley, wolves have been reported in the Arsi Mountains since the 1920s, and, more recently (1959), in the Bale Mountains. Reports of small populations in North Sidamo (Haltenorth and Diller 1980) may be in error. There is no evidence that the Ethiopian Wolf ever occurred in Eritrea (Coetzee 1977).

The species currently is confined to seven isolated mountain ranges of the Ethiopian highlands, at altitudes of 3,000–4,500 m (Gottelli and Sillero-Zubiri 1992, Marino 2003a). In the northern highlands wolves are restricted to land above 3,500–3,800 m by increasing agricultural pressure (Yalden et al. 1980, Marino 2003a). Wolf populations occur north of the Rift Valley in the Simien Mountains, Mount Guna, North Wollo and South Wollo highlands, and Menz. Recently extinct in Gosh Meda (North Shoa), and absent from Mt Choke, Gojjam, for a few decades. South-east of the Rift Valley there are populations in the Arsi Mountains (Mt Kaka, Mt Chilalo and Galama range) and in the Bale Mountains, including the Somkaru-Korduro range (Marino 2003a).

The species is not included on the CITES Appendices. It has full official protection under Ethiopia's Wildlife Conservation Regulations of 1974, Schedule VI. Killing a wolf carries a sentence of up to two years.

The Ethiopian Wolf occurs in several protected areas: Bale Mountains National Park; Simien Mountains National Park; Borena Saiynt Regional Park (South Wollo); Guassa Community Conservation Area (North Shoa); Arsi Mountains Regional Park. As a result of boundary extensions (Simien) and new parks created (Arsi) the area of suitable wolf habitat within protected areas increased to 87%.

A number of important steps have been taken in the interests of conserving this endemic species, including: 1) a dog vaccination campaign in Bale, and vaccination campaigns  in response to rabies outbreaks in dogs close to wolves in Menz and Simien; 2) sterilization programme for hybrids in Bale; 3) vaccination of wolves in response to rabies epizootics in parts of Bale; 4) community and school education programme in Bale and Wollo; 5) strengthening the capacity of the Bale Mountains National Park – funding patrolling, maintenance of infrastructure, etc.; 6) surveys to determine the persistence and status of all populations of wolves; 7) monitoring of all wolf populations; 8) A Strategic Planning workshop for Ethiopian wolf conservation held in Lalibela, February 2011, resulting in a National Action Plan for the next 10 years (IUCN/SSC Canid specialist Group 2011).

In 1983, the Wildlife Conservation Society established the Bale Mountains Research Project, which publicized the wolf's plight and started a regular monitoring programme for the species. A detailed four-year field study followed (Sillero-Zubiri 1994). Based on its findings, the IUCN/SSC Canid Specialist Group produced an action plan for the Ethiopian Wolf (Sillero-Zubiri and Macdonald 1997), which provided a detailed strategy for the conservation and management of remaining wolf populations. This plan advocated immediate action on three fronts – education, wolf population monitoring, and rabies control in domestic dogs – to conserve the Afroalpine ecosystem and its top predator. As a result, the Ethiopian Wolf Conservation Programme (EWCP) was established in 1995 by Oxford University with financial support from the Born Free Foundation, Frankfurt Zoological Society (FZS), the Wildlife Conservation Network  and other donors. The Programme’s overall aim is to protect the Afroalpine ecosystem and many of its rare highland endemic plants and animals through better management in Bale and the establishment of other conservation areas in Menz and Wollo. The EWCP currently monitors the demography of the Bale and selected populations in South and North Wollo, supports park patrols within the wolf range, undertakes domestic dog control and the removal of dog-wolf hybrids. Additionally, the EWCP carries out a community conservation education campaign that targets people living inside the wolf's range and is aimed at improving dog husbandry and combating disease in the park and surroundings. A large-scale dog vaccination programme (targeting up to 5,000 dogs a year) seeks to reduce the occurrence of rabies and distemper within the Ethiopian wolf range and is backed up by further epidemiological and demographic studies. The EWCP is also active elsewhere in Ethiopia, with representatives surveying and monitoring all wolf ranges and implementing education campaigns about the plight of the species. Zelealem Tefera Ashenafi set up the Guassa Biodiversity Project in 1996, looking at the relationships between pastoralists and wildlife in the highlands of Menz. FZS and partners are working in North Ethiopia to protect the Afrolapine ecosystem, supporting the Simien Mountains National Park and creation of a new community conservation area in North Wollo.