It occurs in waters of the South China Sea, Japan, Philippines, Palau, Indonesia, Northern Mariana Islands, as well as northern and northeastern Australia.

[3] This species has been reared on a diet of glass shrimp (Acetes sibogae australis) in the laboratory.

[6] The type specimen was collected in the South China Sea (04°20′N 107°20′E / 4.333°N 107.333°E / 4.333; 107.333) and is deposited at the Zoologisk Museum of Kobenhavns Universitet in Copenhagen.

[7] The Idiosepius pygmaeus is heavily concentrated in seagrass meadows.

However, due to environmental changes caused by human activities, seagrass meadows have been disturbed.