It grows at high elevations of 2,100–4,100 metres (6,900–13,500 ft) in cloud forests with cool, humid summers and dry winters in most of its habitat regime.

The sacred fir is the preferred tree for the monarch butterfly (Danaus plexippus) to reside in colonies during its hibernation in the forests of the Trans-Mexican Volcanic Belt.

Although monarch butterflies are known in other parts of the southern Mexican highlands as some specimens do not migrate, the bulk of them gather in a few protected fir forests in the Monarch Butterfly Biosphere Reserve near the towns of Angangueo (Michoacán) and Avándaro (State of Mexico), from December to March.

[6] A 2012 paper by Cuauhtemoc Saenz-Romero among others, published in Forest Ecology and Management found that "the area suitable for the oyamel is likely to diminish by 96 percent by 2090, and disappear completely within the [Monarch Butterfly Biosphere] reserve.

"[7][8] By 2024, results from an ongoing assisted migration experiment by Saenz-Romero's science team had achieved success in higher elevation plantings of oyamel fir on a nearby volcanic mountain in anticipation of end-of-century climate change.