It breeds in cultivation, pasture, and open woodland with some trees from eastern Honduras south to northwestern Peru, northern Bolivia and western Brazil The nest, built by the female in a bush, tree or on a building, is a large roofed structure of stems and straw, which for protection is often built near a wasp, bee or ant nest, or the nest of another tyrant flycatcher, such as the similar social flycatcher, Myiozetetes similis.

The typical clutch is two to four brown or lilac-blotched dull white eggs, laid between February and June.

The adult grey-capped flycatcher is 16.5–18 cm long and weighs 26–30 g. The head is grey with a short weak eyestripe and, in the male, a concealed vermilion crown stripe.

Young birds have no crown stripe, and have chestnut fringes to the wing and tail feathers.

Grey-capped flycatchers sally out from an open perch in a tree to catch insects in flight.