The Azure-rumped Tanager Tangara cabanisi is a globally threatened species restricted to the Pacific slope mountains of western Guatemala and Chiapas, Mexico. We studied the habitat use of this tanager on the southern slope of Atitlán volcano, department Suchitepéquez, Guatemala, applying distance sampling along transects in humid broadleaf forest and coffee plantations. The tanager was recorded in both habitat types, but encounter rates were significantly greater in broadleaf forest. The estimated density of tanagers in forest at 1,400–1,900 m was 33–93 birds km−2. Tanagers were recorded mainly in the upper vegetation strata of forest and shade coffee plantations. In coffee plantations tanagers used mainly tall solitary trees or the canopy of shade trees, which were dominated by Inga spp. The number of observations of feeding tanagers in Ficus aurea (Moraceae) indicated a high importance of this food source. The density of F. aurea trees and the encounter rate of tanagers were positively correlated. From 1987 to 2009 tanagers have been recorded at nine topographic units and a total of 16 sites in Guatemala, in the departments of San Marcos, Quetzaltenango, Sololá, Suchitepéquez, and Chimaltenango. We analysed the available habitat for tanagers in the potential area of distribution (1,170 km2), ranging from 900 to 1,900 m altitude and from the Mexican border in the West to the municipality of Pochuta in the East. Broadleaf forest covers 250 km2 or 21% of the potential area of distribution, and coffee plantations cover 800 km2 or 68%. Assuming that population density in prime habitat throughout the potential distribution range is similar to our study area at Atitlán volcano, total tanager population in Guatemala is estimated to be 8,250–23,250 birds. Our findings support the maintenance of the IUCN Red List status of Endangered EN B1a+b(ii,iii,v). To enhance the available habitat for Azure-rumped Tanager, we propose alterations in the shade management of coffee plantations, supported by incentives and certification programmes.