Butterflies are good indicators of environmental health, and they play a critical role in the food chain. Butterfly diversity and abundance were studied for the first time at three forests and their surrounding habitats in northwestern Ethiopia, a borderline ecosystem between the subtropical savannah and the Ethiopian highlands (Afromontane). Butterfly species richness and abundance were assessed using transects between October 2018 and June 2019. Data were analyzed using analysis of variance, correlation and regression analysis, diversity indices, ordination analysis, cluster analysis, and rarefaction curves. A total of 27,568 butterflies were recorded that belonged to three families, five subfamilies, and eight genera. The forest habitat had more butterfly taxa (abundance and diversity) than other habitats. Belenois spp. and Mylothris agathina were the most abundant in all three study locations. Species common to all study areas include Belenois aurota, Belenois raffrayi, Mylothris agathina, Eronia leda, Junonia terea elgiva, and Phalanta eurytis neuritis. Forest edge and woody forest habitats were the richest in terms of both number of species and number of individuals. Equitability (Pielou's index) showed equal distribution of the species, i.e., 0.8 to 0.9, except at the open grassland at Tara Gedam (0.3). Margalef's index varied between habitats and locations showing differences in species richness (from 0.25 at the woody forest of Mount Bezawit to 0.86 at the forest edge of Tara Gedam). Ordination analyses also showed that associations existed between habitats, locations, and dates of sampling. Rarefaction curves rose quickly at the forest edge and woody forest habitats compared to other forests. The cluster analysis discriminated the different habitats. Populations declined during the dry season (December to April). In conclusion, butterfly species diversity and abundance varied with respect to habitat and sampling date (season), although less diverse than other regions in the country where natural forests still widely exist. Butterfly species must be regularly monitored, and their habitats must be preserved for the health of the entire ecosystem.