They mainly associate with open country, including grassland, grassland with scattered thickets, and lightly wooded areas, particularly in the dry Karoo regions, the Kalahari and the fringes of the Namib Desert. They also penetrate moderately dense vegetation in lowland fynbos in the western Cape, as well as extensive agricultural lands where they lie up in surviving pockets of natural vegetation during the day and forage on arable and cultivated fields at night (Stuart 1981). Along the eastern flank of the Namib Desert, Namibia, they occupy rock outcroppings and inselbergs, ranging out onto bare gravel plains at night (Stuart 1975). In Botswana, they have been recorded from Acacia-scrubland, short grassland and especially on the fringes of shallow seasonal pans, as well as cleared and overgrazed areas (Smithers 1971). In the central Karoo of South Africa, they occupy the plains as well as the low rocky ridges and isolated rock outcroppings. In the Free State, Lynch (1975) found that they were most abundant in areas receiving less than 500 mm of rainfall, although in KwaZulu-Natal they have been recorded between 1,000 and 1,500 m above sea level, where rainfall is roughly 720–760 mm (Rowe-Rowe 1992).

The species is widespread in the central and western regions of southern Africa, reaching to about 15°N in south-western Angola (Crawford-Cabral 1989). It occupies mainly arid and semi-arid areas, but in parts, such as the fynbos biome of South Africa's western Cape Province, the species enters areas receiving higher precipitation and denser vegetation. The species has expanded its range over recent decades to the south-west where it reaches the Atlantic and Indian Ocean coastlines (Stuart 1981). Expansion through South Africa's eastern Cape Province has been documented (Coetzee 1979). Status in Swaziland is uncertain, but they may occur in the south-west (Monadjem 1998), as the species occurs in adjacent regions of north-western KwaZulu-Natal (Rowe-Rowe 1992); they are not confirmed from Lesotho, but may occur (Lynch 1994). Previous records of its occurrence in western Zimbabwe (Roberts 1951, Coetzee 1977) and Mozambique (Travassos Dias 1968) have not been substantiated, and it is considered unlikely that these records are valid.

Not listed in the CITES Appendices. Occurs in many protected areas across its range, including a number of provincial and private nature reserves, as well as on game ranches in all South African provinces, although the species has a much more restricted range in Limpopo Province and KwaZulu-Natal (Stuart 1981, Rautenbach 1982, Lynch 1975, Rowe-Rowe 1992). In Swaziland, the species may occur in Nhlangano Nature Reserve in the south-west and pups have been successfully reared in Milwane Game Reserve (Monadjem 1998).

Although treated as a problem animal across most of its range, it is partially protected in several South African provinces, as it does not appear on the official lists of problem species. However, no permit is required from any authority to kill this fox in problem animal control operations. No protection measures are currently enforced and at the present time, this is not necessary.

Although the Cape Fox has been extensively studied in South Africa's Free State province (Lynch 1975, Bester 1982, Kok 1996), there is little information available elsewhere within its range. Aspects such as diet and reproduction are quite well known, but little information is available on aspects of social ecology and behaviour in the wild. Some investigation into the role, if any, this species plays in disease transmission is necessary.