Lovely Fairy-wrens are restricted to NE Queensland, mainly coastal, from Cape York south to near Townsville on the east coast and to near Kowanyama on the Gulf. Once upon a time, the two "Lavender-flanked Fairy-wrens" from the Kimberleys in W.A. and from Arnhem Land in the N.T. were also regarded as forms of the Lovely Fairy-wren on the basis of their bluish females, but they are now classed as subspecies of the widespread Purple-backed Fairy-wren, M assimilis. Lovely Fairy-wrens are also close relatives of the Variegated, but distinct enough to be maintained as a different species.

Lovely Fairy-wrens mainly inhabit edges of rainforest, coastal thickets and other lush broad-leaved vegetation fringing watercourses. On Cape York they occur throughout the vine thickets such as the Lockerbie Scrub and in some other areas they do occur right into rainforest, especially where the vegetation has been disturbed such as along tracks or in clearings. They are the most arboreal of all the fairy-wrens, ascending the trees up as far as 20 metres, especially in rainforest. Like most other fairy-wrens, they live in family groups consisting of an adult pair and their progeny, sometimes including more than one male in breeding plumage. Little is known about their life history - they appear to occupy permanent territories and are regarded as resident the year round. Territory size probably varies depending on habitat; in the coastal scrubland at the mouth of Crystal Creek about 50km N of Townsville where I took most of these pictures, I found a group (mainly pairs) of birds about every 200 metres along the sandy coastal track.