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The natural biome of the possum is temperate forest or scrubland, particularly dry and/or wet sclerophyll forest, commonly known as bushland in Australia. They also live in rainforests. The Mountain Pygmy possum is restricted to alpine country in southeast Australia, where there are plenty of mountain Plum pine trees.

They do not live in grassland, as there are insufficient trees there, but they have adapted well to suburbia, wherever there is a decent sized tree, or an accessible roof cavity in a house.

Note that possums are not the same as "opossums", native marsupials of North America, which often have their name shortened to "possum".

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