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Abstract Background The impact of changing land-use patterns and associated anthropogenic threats on scale-dependent habitat use of semi-aquatic mustelids in scent-marking and social behaviour can provide important insights into the habitat ecology of smooth-coated otters (Lutrogale perspicillata). Methods We sampled 180 stream segments (100–400 m) as spatial replicates of 60 1-km2 sites to record indirect evidence (i.e. spraints and mass latrine sites) and group sizes of smooth-coated otters along the Tungabhadra Otter Conservation Reserve (TOCR) during the dry season. To quantify habitat, we recorded stream characteristics, riparian vegetation, and anthropogenic disturbances at the local scale, and hydro-environmental characteristics and land uses at the landscape scale. Using Markovian-chain detection and occupancy models, we assessed the multi-scale habitat use of otters in their selection of suitable areas for scent-marking based on repeated presence-absence data on spraint/latrine locations along the TOCR. We further used linear regression techniques to explore relationships between the number of individuals in smooth-coated otter group and hydro-environmental characteristics, spraint/latrine encounter rate, anthropogenic pressure, land cover, topography, and vegetation. Results At the local scale, the probability of spraint deposition and group size decreased with anthropogenic disturbance while the probability of spraint detections decreased with grass cover. At the landscape scale, the probability of otter site use for spraint deposition and group sizes increased in southeast flowing streams. Spraint deposition increased with the proportion of sugarcane fields, whereas in contrast, group size decreased with proportion of sugarcane fields. Conclusions Our findings highlight the first empirical evidence on multi-scale habitat use of a southern Indian population of smooth-coated otters in an inland freshwater ecosystem surrounded by the scrub jungle–agriculture matrix. We suggest that habitat models built from analytical approaches that account for correlated detections can avoid biased predictions when estimating occupancy and detection probability of semi-aquatic or riparian mammal communities with linear distributions. Our findings indicate that human activity can impose constraints on the choice of sites used for spraint deposition and preliminary patterns in otter groups. The study provides some crucial evidence on the need to maintain areas with minimal human interference for sustainability of freshwater reserves.