The Lesser Sheath-tailed Bat roosts in small groups under palm leaves and in limestone caves, under rock overhangs and in the roofs of houses. They forage for small insects in a wide variety of primary and secondary habitats, including tropical broadleaf forest, mangroves, coconut groves, rural gardens, and villages (Bonaccorso 1998). Females give birth to two young annually.
Their echolocation call is distinctive, and recorded commonly on acoustic surveys in Papua New Guinea. Pulse shape resembles that of Hipposideros, but the strongest second harmonic has a characteristic frequency of c. 60–70 kHz, and the call is currently difficult to distinguish from that made by Emballonura beccarii where the distributions of these two species overlap (K.N. Armstrong, unpublished data).

The distribution of this species extends from Indonesia, Papua New Guinea, to the Solomon Islands. In Indonesia, it has been recorded from many islands including Sulawesi, Halmahera, Morotai, Ambon, Buru, Seram, Salawati and Biak, and is present in the Fak-fak, Jayapura, Manokwari and Merauke districts of West Papua. In Papua New Guinea, it has been recorded throughout the mainland provinces, as well as Manus Island, New Britain, New Ireland, Bougainville and Nissan Island. In the Solomon Islands, it has been recorded on the islands of Fauro, Guadacanal, Malaita, New Georgia, Nggela Sule, Pavuvu, San Cristobal, Davo, Shortland, Uki Ni Masi, and Vella Lavella (Bonaccorso 1998; Flannery 1995a,b; Corbet and Hill 1992).

Known from numerous protected areas across Papua New Guinea, including the Kau Wildlife Management Area, Madang Province. Populations of this species can be maintained through the preservation of primary and secondary forest habitat. Roost sites discovered with dozens or hundreds of individuals should be managed to discourage visitation and disturbance by people. Ideally, these sites should be conserved and protected by working with local authorities and communities.