Anthropogenic activities and associated global climate change are threatening the biodiversity in the Himalayas against a backdrop of poor knowledge of the region's threatened species. The red panda (Ailurus fulgens) is a threatened mammal confined to the eastern Himalayas, and because of Bhutan's central location in the distributional range of red pandas, its forests are integral to the long-term viability of wild populations. Detailed habitat requirements of the red panda are largely speculative, and there is virtually no ecological information available on this species in Bhutan. Between 2007 and 2009, we established 615 presence/absence plots in a systematic sampling of resident habitat types within Jigme Dorji and Thrumshingla National Parks, Bhutan, to investigate broad and fine-scale red panda habitat associations. Additional locality records of red pandas were obtained from interviewing 664 park residents. Red pandas were generally confined to cool broadleaf and conifer forests from 2,110-4,389 m above sea level (asl), with the majority of records between 2,400-3,700 m asl on south and east-facing slopes. At a finer scale, multivariate analysis revealed that red pandas were strongly associated with old growth Bhutan Fir (Abies densa) forest dominated by a dense cover of Yushania and Arundanaria bamboo with a high density of fallen logs and tree stumps at ground level; a high density of trees, dead snags, and rhododendron shrubs in the mid-storey; and locations that were close to water. Because Bhutan's temperate forests that encompass prime red panda habitat are also integral to human subsistence and socio-economic development, there exists an inadvertent conflict between the needs of people and red pandas. As such, careful sustainable management of Bhutan's temperate forests is necessary if a balance is to be met between the socioeconomic needs of people and the conservation goals for red pandas.