The Critically Endangered mangrove finch Cactospiza (=Camarhynchus) heliobates is now confined to Isabela Island in the Galápagos Islands and is exclusively found in mangrove forests. Formerly it occurred also on neighbouring Fernandina Island, but is apparently extinct there. The population size and ecology of the species was relatively unknown until 1994. We conducted surveys, habitat assessments and behavioural observations of the species between 1996 and 2000. Although Isabela Island has approximately 760 ha of mangrove forests, breeding was confirmed at only two sites, comprising 32 ha in total, on the north-western coast. Our estimate of the population in these two areas is 100 individuals. Additionally, 3–5 territories (which probably contained breeding individuals) were discovered on the south-eastern coast. A comparison of habitat parameters showed that tree height and amount of dead wood were significantly higher within than outside territories, and these are therefore likely to be important habitat components for this species. As considerable structural differences were detected between the two sites holding the main populations and all other mangrove stands on Isabela, it seems possible that the latter are sub-optimal habitat. We therefore conclude that one of the reasons for the very limited distribution of the species is habitat degradation caused by hitherto unknown factors.