1. The distribution of Cape clawless otters, Aonyx capensis, in South Africa and their habitat requirements in freshwater and marine systems has been well established. There is, however, a lack of information on how otters are adapting to urban development and the transformation of critical freshwater habitat.2. Within the Western Cape, the Cape Peninsula exhibits substantial variation in levels of human impact over a small geographic range, offering an excellent opportunity to explore the hypothesis that otters are adversely affected by habitat transformation.3. A single season occupancy model was used based on otter sign to determine the probability of otter occupancy across a gradient of habitat transformation at both landscape and local scales.4. The probability of otters occupying river habitat in the Cape Peninsula was low (P = 0.29) but increased with proximity to marine protected areas (MPAs) that included estuaries and wetland habitat. Otter presence was not influenced by proximity to urban areas at the landscape scale, but declined in canalized sections of river that were heavily degraded by human activity. 5. Despite being heavily transformed, lowland aquatic ecosystems may still provide critical resources in the form of fresh water and breeding sites, and together with food within the marine habitat may be sustaining the peninsula's otter population.6. In order for otters to persist on the peninsula, conservation authorities must maintain wetland, estuarine and river habitat in close proximity to MPAs. Further research is needed to determine the long-term impacts on otters persisting in degraded ecosystems. 7. Annual single season occupancy surveys provide a rapid, cost-effective method for monitoring changes in otter occupancy which should be incorporated into current monitoring efforts to provide much needed long-term monitoring of a top predator in freshwater ecosystems.