Its natural range runs from Mato Grosso do Sul and São Paulo in southern Brazil through Paraguay to northern Argentina and Uruguay.

[2][3] It was given the name dwarf yatay palm in English by 2000,[4] and it is locally known as yata'i in Guaraní in Paraguay,[5] or butiá-do-cerrado in Portuguese in Rio Grande do Sul, Brazil.

[7] In 1916 Odoardo Beccari reduced Cocos paraguayensis to a variety of Butia yatay, yet at the same time he described a new species from San Ignacio, Misiones, Argentina, which he named B.

[10] In a 1979 review of the genus Butia by Glassman, he continued to distinguish B. pungens,[8] believing B. paraguayensis did not occur in Misiones province,[4] but since at least 1996 this taxon is now considered a synonym of B.

[13] In Paraguay this species is very common; it occurs in the departments of Amambay, Caaguazú, Caazapá, Canindeyú, Concepción, Cordillera, Guairá, Misiones, Ñeembucú, and San Pedro.

[15] Bauermann et al. investigated the possibility of using palm pollen, including this species, in palynology, in order to try to provide more detail about the ancient changes in habitat in the state Rio Grande do Sul in Brazil by tracking the changes in distribution and abundance of the palms, but were unable to provide much detail on the subject.

[5][7][16] The 6 to 20 arched pinnate leaves[6] range from a glaucous to dark-green and the petiole margins are covered in fibres and a row of spines up to 4 cm long.

The fruit are 3-4 x 2-3 cm, juicy, slightly fibrous, taste sweet-sour, with a persistent perianth base and 1-3 large nuts with homogeneous endosperm.

[5] In the Mbaracayú Forest Nature Reserve the ferns Pleopeltis decumanum usually, and P. hirsutissima and Serpocaulon latipes on occasion, grow as epiphytes upon the trunks of this palm.

[5] The rare bird Caprimulgus candicans, the white-winged nightjar, appears to prefer open grassland with low density stands of these palms (campo sucio) as habitat.