Dusky Woodswallows inhabit the eucalypt forests and woodlands of southern and eastern Australia and Tasmania where they breed in much the same traditional territories year after year. In cooler southern regions, particularly in Tasmania, they leave these territories in winter and move further north or inland to warmer climes whereas birds from further north in Queensland are more sedentary. Like some of our other birds that feed high overhead much of the time in cool air currents, they indulge in behaviour which helps to minimise heat loss. Duskies, along with Black-faced and Little Woodswallows belong to a group of three dark-coloured woodswallows in Australia that have a very distinctive habit called clustering where they roost together like a swarm of bees on the side of a tree hollow or other protected cavity. In the nesting season twenty or thirty birds may cluster together, but in winter, when Duskies form larger flocks in some areas, the size of these clusters can be quite large. There is one record from the Karri forest of south-western Australia where there were nearly 500 birds in the large burnt-out trunk of a karri tree.

Dusky Woodswallows mainly nest as pairs, but there are some records of immature helpers at the nest, probably the progeny of previous nestings.