Two-toed sloths spend most of their time in trees, though they may travel on the ground to move to a new tree, and are excellent swimmers. They are strictly nocturnal, moving slowly through the canopy after dark, munching on leaves. The name "sloth" means "lazy," but the slow movements of this animal are actually an adaptation for surviving on a low-energy diet of leaves. These sloths have half the metabolic rate of a mammal of the same size. Sloths have very poor eyesight and hearing, and rely almost entirely on their senses of touch and smell to find food.

Two-toed sloths hang from tree branches, suspended by their huge, hook-like claws, which are two to three inches long. Sloths sometimes are found hanging off trees after they die. Nearly everything a sloth does, including eating, sleeping, mating, and giving birth, is done while hanging from the branches in the trees. The only time that sloths are normally found right side up is when they go down to the ground to defecate, which they only do about once every 5 days.

Sloths have many predators, including jaguars, eagles, and large snakes. If threatened, sloths can defend themselves by slashing out at a predator with their huge claws or biting with their sharp cheek teeth. However, a sloth's main defense is to avoid being attacked in the first place. The two-toed sloth can survive wounds that would be fatal to another mammal its size. The sloth's slow, deliberate movements and algae-covered fur make them difficult for predators to spot from a distance. Their treetop home is also out of reach for many larger predators. Their long, coarse fur also protects them from sun and rain. Their fur, unlike other mammals, flows from belly to top, not top to belly. This is so that when it rains, and they are hanging upside down, the rain slides off the fur easily.