In the North Bilaspur Forest Division in Madhya Pradesh, India, the sloth bear (Melursus ursinus) population is ecologically isolated, and some bears have developed aggressive behavior. Available bear habitat is highly fragmented and degraded and is interspersed with human habitation. In this study we assessed habitat use patterns of sloth bears with the goal of establishing management guidelines to reduce human–bear conflicts. Goodness-of-fit comparisons showed that expected use of each habitat category differed from habitat availability. Bear sign was most frequent in sal forest followed by land near water, sal mixed forest, and mixed forest. However, bear use of terrain categories was not different from expected use. A large number of bear dens were near water and human settlements. Bears regularly used more than 50% of observed den sites. Because of nearness to human settlement and degraded habitat, bears largely depended on villages for food, resulting in frequent human–bear encounters, some of which led to maulings and fatalities. One management priority is to protect highly preferred habitats of sloth bears. Bear population control and translocation of bears from isolated habitat patches to more suitable areas may be carried out simultaneously with education and awareness programs to conserve this species and to mitigate human–bear conflicts on a long-term basis.