The bat-eared fox has a disjointed range of distribution across the arid and semi-arid regions of Eastern and Southern Africa, in two allopatric populations (representing each of the recognized subspecies) separated by approximately 1,000 km. Subspecies O. m. virgatus extends from southern Sudan, Ethiopia and Somalia, through Uganda and Kenya to southwestern Tanzania; O. m. megalotis occurs in the southern part of Africa, ranging from Angola through Namibia and Botswana to South Africa, and extends as far east as Mozambique and Zimbabwe, spreading into the Cape Peninsula and toward Cape Agulhas. Home ranges vary in size from 0.3 to 3.5 km2.There are no confirmed observations in Zambia.

Bat-eared foxes are adapted to arid or semi-arid environments. They are commonly found in short grasslands, as well as the more arid regions of the savannas, along woodland edges, and in open acacia woodlands. They prefer bare ground and areas where grass is kept short by grazing ungulates and tend to hunt in these short grass and low shrub habitats. However, they do venture into areas with tall grasses and thick shrubs to hide when threatened.

Raising their young in dens, bat-eared foxes use self-dug dens for shelter from extreme temperatures and winds. They also lie under acacia trees in South Africa to seek shade during the day.