Throughout its range, the species can be found in a wide variety of habitats, usually associated to water courses, riparian vegetation, and gallery forests. In its southern distribution, the species can be found in wet grasslands and savannas near forests, savanna woodland habitats, and temperate grassland pampas, marshy or riparian habitats, mesic savanna woodlands in Chaco, tropical grassland and gallery woodland environments in Brazil, woodlands and humid forests in northern Bolivia (Stein and Patton, 2008, Astúa 2015). In its northern distribution, the species can be found in tropical grasslands and also dry pastures (Astúa 2015). It is reported to be nocturnal and crepuscular, preying on small vertebrates, fish, and insects. One stomach contained remnants of mollusk shells and sand, and this species has been caught in traps baited with mice. In captivity Lutreolina will eat insects and fruits, and kill birds and mammals up to the size of Cavia. A recent study of fecal samples showed the species has broad feeding habits, including fruits and other plant remains, amphibians, birds, arthropods and snails (Muschetto et al. 2011). This mesic-adapted animal is found along areas of permanent water. It is somewhat weasel-like in form and habits. Different studies show it can swim and climb well.

The species has a disjunct distribution in South America, occupied by two subspecies: the southern area, where Lutreolina crassicaudata crassicaudata lives, includes central-eastern Argentina to southeastern Brazil, including Uruguay, eastern Paraguay, parts of central-northern Bolivia, and extreme southeastern Perú (Madre de Dios), the northern area, where Lutreolina crassicaudata turneri (it might represent a distinct, yet undescribed, species) lives, includes east-central Colombia, Venezuela through western Guyana (Stein and Patton 2008). The species is suspected to be found continuously down the Orinoco River in Venezuela, although there are no records (D. Lew and P. Soriano pers. comm.).

This species occurs in a number of protected areas.