Cotyledon xanthantha is only known from the Goukou River and its tributaries in the Still Bay region of the eastern portion of the Western Cape (South Africa). It grows in Southern Cape Valley Thicket vegetation (Mucina et al. 2006). These thickets are usually confined to dry river valleys, and often dense and thorny. Cotyledon xanthantha grows semi-scandent in the thickets among Ecca Shale rocks (Karoo Supergroup). The plants tend to scramble in a similar fashion to Cotyledon adscendens from the Dune Thickets at Port Elizabeth in the Eastern CapeProvince. Associated species in the rocky terrain includes Carissa bispinosa, Euclea undulata, Searsia burchellii and Diospyros dichrophylla. It also shares its habitat with succulents such as Adromischus caryophyllaceus, Aloe ferox and A. glauca, Crassula cliata, C. lactea and C. pubescens var. pubescens, Delosperma prasinum, Pelargonium peltatum, Sarcostemma viminale and Curio archeri.

The climate of the region is mild, and receives rainfall at any time of the year (300–400 mm per annum). Frost is rare, and when occurring, is very light. Summers tend to be windy, and regularly cooled by south-easterly winds. It has been grown on the Mathews Rockery at Kirstenbosch National Botanical Garden and in the Gardens of the San at Babylonstoren Farm, flowering annually. The yellow, tubular flowers are visited regularly by local sunbirds (Nectarina spp.). The name of the Goukou River is of Khoi origin. It was named by the Koranna people, gou referring to the Gouritz Rivier and kou, ‘before’, pertaining to the last of series of rivers before the great Gouritiz River. The latter the largest river system in the region, draining much of the Karoo.