The Greyish Baywing is distributed from Bolivia, through Paraguay, south Brazil and Uruguay to central Argentina. See the distribution map at Birdlife International. It is normally found in dry, scrubby open woodland and are often seen in small flocks.

Unlike other cowbirds it is not a brood parasite and, in fact, the Greyish Baywing itself is a victim of brood parasitism by other cowbirds mainly the Screaming Cowbird Molothrus rufoaxillaris. While the Greyish Baywing breeds normally and sometimes builds its own nest, it often uses old nests of other species such as the Rufous-fronted Thornbird Phacellodomus rufifrons. This "nest parasitism" has been interpreted as a primitive stage of parasitism.