They are native to the Andes mountains in South America, where they can be found at elevations up to 4,270 m (14,000 ft). Historically, chinchillas lived in an area that included parts of Bolivia, Peru, Argentina, and Chile, but today colonies in the wild are known only in Chile.

The chinchilla has the densest fur of all mammals that live on land. In the water, the sea otter has a denser coat.

A chinchilla's teeth, like those of other rodents, are open-rooted and grow continuously throughout their lives. Wild chinchillas have evolved this type of teeth to adapt to prolonged chewing on the rough shrubbery and vegetation they survive on. Their front teeth, or incisors, can grow as much as 2 to 3 inches per year.

In their native habitats, chinchillas live in burrows or crevices in rocks.

In nature, chinchillas live in social groups that resemble colonies, but are properly called herds. Herd sizes can range from 14 members up to 100, this is both for social interaction as well as protection from predators.

Since they lack the ability to sweat, chinchillas require a temperature-controlled environment. An overly warm chinchilla is characterized by veins prominently visible in the ears, warm feet, and lethargy.

Because their thick fur is extremely slow to dry, water baths can lead to fungal infections. Instead, chinchillas like to take vigorous dust baths, which help to evenly distribute natural oils, clear away dirt and debris, and keep their fur silky soft. In their native, arid habitats in the mountainous regions of South America, chinchillas use volcanic ash to keep clean.

They grow up to sixty hairs from one follicle, whereas humans only grow one hair per follicle. As a result, chinchillas have about 20,000 hairs on each square inch of their bodies.

In the wild, chinchillas eat plant leaves, fruits, seeds, and small insects.

Baby chinchillas are called "kits". They will typically begin to walk within an hour of birth and begin to sample food on their own within the first week of life.