Scarlet-thighed Dacnis is found in the Chocó Lowlands, Chiriqui-Darien Highlands, and Gulf-Caribbean Slope zoogeographic regions (Parker et al. 1996), from Costa Rica and Panama south through western Colombia to northwestern Ecuador; there also are a few reports from Nicaragua (Slud 1964, Isler and Isler 1987, MartÍnez-Sánchez et al. 2014). It is near-threatened in Ecuador, rare to uncommon from Esmeraldas west to Mache-Chindul to northern Guayas and southeast Pichincha to the Rio Palenque; mainly seen from Pinchincha and northward, and fairly common in the Cordillera de la Costa (Parker and Carr 1992, Ridgely and Greenfield 2001, Vogt and Ahlman 2006). In Colombia it is found in the Tropical Zone of the Pacific Coast, east to lower Cauca and Anorí in northeast Antioquia, and is fairly common along the humid northern base of the West and Central Andes without entering the less humid lowlands to the north (Meyer de Schauensee 1951, Haffer 1967, Cuervo et al. 1999, Ayerbe-Quiñones et al. 2008). In Panama it is found in the humid foothills on both slopes (Wetmore et al. 1984). In western Costa Rica it does not occur in the tropical dry forests, extending north as far as Monteverde, and is considered rare along the Pacific slope (Buskirk 1976). In Costa Rica the center of abundance is the Subtropical Belt (Slud 1964). It is more common in Costa Rica along the Caribbean slope and the forests in the southern half of the Pacific slope and is abundant in the subtropical belt area (Slud 1964). Its range may be expanding into Nicaragua, where it is reported as scarce and local on the Caribbean slope, with a handful of reports from the Cordillera Isabelia in the northern part of the country (eBird 2012, MartÍnez-Sánchez et al. 2014).
The center of abundance is the Upper Tropical Zone, from the lowlands to about 1200 m, but usually between 200-700 m (Parker et al. 1996, Ridgely and Tudor 1989). In Ecuador it is normally seen below 800 m, possibly nesting in the foothills and moving to lower altitudes after the breeding season (Ridgely and Greenfield 2001, Vogt and Ahlman 2006). In Colombia it is found from the lowlands to about 1700 m, but is more common at or below 700 m (Cuervo et al. 1999, Strewe 2003). In Costa Rica it is more common in the upper Tropical Zone, include 500-1200 m on the Caribbean slope with small numbers occasionally reported along the coastal plain, and 900-1500 m on the Pacific-slope (Skutch 1967, Hilty 2011). Other elevational ranges reported include Panama where it is fairly common in the foothills from 1000-1920 m (Strauch 1977, Wetmore et al. 1984); and in Nicaragua, it occurs up to 700 m (Martínez-Sánchez et al. 2014).
This species apparently can be irruptive and/or undergo short-distance or seasonal intra-Neotropical migrations (Skutch 1962, Hilty and Brown 1986, Stiles and Skutch 1989, Hilty 1997, Robinson 1999). In the northeastern lowlands of Costa Rica, at the northern extent of its distribution, it is typically only found in the second half of the year (Carriker 1910, Slud 1960). On the Pipeline Road in Panama numbers can fluctuate drastically, from common to absent (Hilty 2011). Sometimes seasonal altitudinal migration is reported (e.g. Pringle et al. 1984), other reports list this species as resident (e.g., Rodríguez Arias and Guido Granados 2012 in Costa Rica). The seasonal abundance of small fruits perhaps drives the irruptive movements of this species (Hilty 2011).