The Scarlet-breasted Dacnis (Dacnis berlepschi) is endemic to the southern part of the Chocó Rainforest Center of Endemism in the Northern Andes Zoogeographic Region (Meyer de Schauensee 1951, Haffer 1975, Cracraft 1985, Parker et al. 1996, Strewe 2003). Within this range, it is rare to uncommon to locally common and patchily distributed (Meyer de Schauensee 1951, Parker et al. 1996, Ridgely and Greenfield 2001). It has a small historic distribution of only 26,100 km², with about 31% of this distribution in Colombia and 69% in Ecuador (Chaparro-Herrera et al. 2013, BirdLife International 2017). In Colombia, it is historically known as far north as La Guayacana, Nariño, and in Ecuador from Esmeraldas, Imbabura, and Pichincha (Carriker 1959, Storer 1970, Birdlife International 2017). In Ecuador it has been recorded from as far south as Río Palenque, where it was first reported in 1979, but apparently has not been seen from there in over two decades (Ridgely and Greenfield 2001, eBird 2012). Throughout their range, their distribution is heavily fragmented with evidence of extirpation from previously known areas; it apparently hasn't been seen in Colombia since 1991 (Strewe 2003, eBird 2012, Múnera 2014), and before this observation no Colombian observations since before 1980 (Stattersfield and Capper 2000). Also, it was reported in Colombia above Junín in west Nariño along the road to Tumaco (Ridgely and Tudor 1989). The largest populations appear to be in northwest Pichincha along the road north of Simón Bolívar near Pedro Vicente Maldonado, and at Playa de Oro in north Esmeraldas, both in Ecuador (Ridgely and Greenfield 2001). It is restricted to the Cis-Andean Pacific Lowlands and low in the adjacent submontane Andean foothills (Collar et al. 1997). The center of elevation distribution extends from the lowlands of about 200 m to as high as about 1,300 m (Meyer de Schauensee 1951, Hilty and Brown 1986, Parker et al. 1996, Strewe 2003), with most reports below 800 m (e.g., Jahn and Valenzuela 2006, Jahn 2011), and perhaps most numerous in the remaining habitat lower than 250 m (Ridgely and Greenfield 2001). Reports from higher elevations may be seasonal (Hilty 2011).

The Scarlet-breasted Dacnis is endemic to South America, known only from extreme northwestern Ecuador and adjacent western Colombia.

Parker et al. (1996) lists the primary habitat of the Scarlet-breasted Dacnis as humid Tropical Lowland Evergreen Forest (Parker et al. 1996, Múnera 2014). It can also be found in secondary forests (Parker et al. 1996), but is strongly associated and primarily reported from pristine forests (Múnera 2014). Within these pristine forests, it may seek relatively open areas such as tree fall gaps, ridges, river borders, and edges (Hilty and Brown 1986, Ridgely and Greenfield 2001, Hilty 2011, Múnera 2014). For example, it was reported from a pristine foothill forest along a ridge near the Cotacachi-Cayapas Ecological Reserve, Ecuador (Jahn 2011). Within these forests it is primarily found in the canopy, occasionally foraging to the sub-canopy or lower at edges (Parker et al. 1996, Hilty 2011, Múnera 2014).

The historic range for this species has been severely fragmented, and populations within this range have been extirpated. At the margins of their distribution, to the north they haven't been seen in Colombia, and to the south along the Río Palenque, Ecuador in over two decades (Ridgely and Greenfield 2001, Strewe 2003, eBird 2012, Múnera 2014).

There are no known fossils for this species.