The Dai people are primarily found in Yunnan Province, China, and have a long heritage there. The latest national census reports that Yunnan is home to 1,259,000 individuals of the Dai ethnic group. This study focuses on 3504 Dai settlements in Yunnan, identified through county records. Using the ArcGIS spatial analysis platform, we first evaluated their settlements’ spatial distribution patterns using metrics like the nearest neighbor index and geographic concentration index. Then, we applied geodetector to investigate the underlying mechanisms of their distribution. The results reveal that: (1) Dai settlements in Yunnan Province generally have a cohesive spatial distribution; at the provincial level, however, there is an uneven distribution pattern, with many densely populated areas and a pattern of “two cores, one belt, one area, and two points”; (2) The Dai settlements predominantly occupy the third gradient of the vertical zonation, with Dai gathering settlements primarily found in the Lancang, Ayeyarwaddy, and Red River basins. Conversely, Dai mixed settlements are mainly situated in the Lancang, Red, and Nu River basins; (3) Analysis via geodetector indicates that ethnocultural factors are the most significant in determining the spatial distribution of the Dai settlements, followed by socio-economic and natural factors; (4) The distribution of settlements is significantly influenced by the proportion of the Dai population within these settlements. Dai gathering settlements are typically located on flat slopes with elevations ranging from 500 to 1000 m and slopes of 0°–5°. Meanwhile, Dai mixed settlements are found on gentle slopes with elevations of 1000–2000 m and slopes of 5°–15°. The study reveals that the location of Dai settlements is strongly influenced by environmental considerations and has a significant explanation from similar origins.