The forest owlet was recorded in central India, and until 1997 was known from just seven specimens in museums collected in northern
Maharashtra, and south-east
Madhya Pradesh or western
Odisha. The last record until then was based on a specimen claimed from
Gujarat in 1914 by
Richard Meinertzhagen. Searches in Gujarat had been futile until the species was rediscovered in November 1997 by a group of American ornithologists in the foothills of the
Satpura Range, northeast of
Bombay. The cause of the earlier failed searches was due to the resubmission of a stolen specimen with the falsification of locality data. The forest owlet was observed in Odisha,
Chhattisgarh, Madhya Pradesh, Maharashtra and Gujarat, and at a few locations in
Melghat Tiger Reserve in Maharashtra. A survey in 2011 in non-protected areas of Maharashtra and Madhya Pradesh confirmed the presence of the species at two locations. In Maharashtra, a pair was observed (out of 7 pairs in 2004) in Toranmal Reserve Forest. In Madhya Pradesh, six individuals were observed in Khaknar. In Maharashtra, it was also reported to inhabit the forest ranges of Taloda and Khaknaar. All these places in central India harbour dense to open
deciduous forests with
Tectona grandis,
Lagerstroemia parvifolia,
Boswellia serrata and
Lannea grandis trees. Nest cavities were found at a height of in trees like
Soymida febrifuga. In most areas, the trees were too young and lacking cavities suitable for nesting. An individual was sighted in Tansa Wildlife Sanctuary in the
Thane district in 2014. It was reported that human disturbed forests with more clearings within the forests were preferred for foraging. In Toranmal Reserve Forest, the forest owlet utilized areas with open canopy and dense undergrowth. In Gujarat, the forest owlet occurs in
Purna Wildlife Sanctuary. ==Behaviour and ecology==