Since World War II, 44% of the heather moorland has been lost in the Berwyn Mountains, mainly to forestry and agriculture. Despite this, these mountains, of which Lake Vyrnwy is a part, have the largest remaining area of heather moorland in Wales. Because of this loss, many of the birds that rely on heather moorland for breeding have become scarce in Wales. These species include red grouse, merlin, hen harrier and black grouse. Much of the reserve management here is aimed at improving the heather to encourage these and other moorland species.

A lot of work was carried out on the reserve in the 1980s to ensure the survival of existing woodlands and to create approximately 80 hectares (200 acres) of new woodlands. The birds that benefit from this work include pied flycatchers, redstarts, wood warblers, great spotted woodpeckers, nuthatches and tawny owls. A huge variety of flowering plants, mosses, ferns, fungi, lichens and insects are associated with oak woodland. The exquisite purple hairstreak butterflies of the woodland canopy can sometimes be seen from the Garrison Hide.

The 2000 hectares (5000 acres) of commercial forestry around the lake has created an additional habitat which is exploited by several species of bird, such as the tiny goldcrest and the widespread coal tit. Some of the more unusual species seen in the forest include goshawk, crossbill, siskin, buzzard, raven and sometimes nightjar.

Several species of orchid, including heath spotted and greater butterfly orchids, may be found. Some of the damp rough pastures are important breeding areas for butterflies such as the small pearl-bordered fritillary. Damp pasture is also important for curlews and snipe, while whinchats and tree pipits can be found on the drier bracken-covered slopes.