The EU Habitats Directive is a key biodiversity conservation instrument. It contains legal obligations for the 28 EU member states in order to safeguard a ‘favourable conservation status’ (FCS) for selected species and habitat types. The crucial FCS concept itself, however, remains subject to considerable confusion regarding its proper interpretation and operationalization, impairing the Directive’s effective implementation. Diminishing this confusion is the purpose of this review. It focuses specifically on large carnivores—wolf (Canis lupus), brown bear (Ursus arctos), Eurasian lynx (Lynx lynx) and wolverine (Gulo gulo). These pose particular challenges, given their low densities, transboundary populations, and human-wildlife conflict potential. Large carnivores are also the only species for which specific guidance has been adopted by the European Commission—and subsequently contested. Our methodology combines legal analysis with an understanding of the species’ ecology and associated social, economic and cultural dimensions. We analyze the methods and processes through which EU law is interpreted, implemented, and enforced, by member states, European Commission, and EU Court of Justice—which is the ultimate authority regarding EU law interpretation. On that basis, we engage three particularly complex interpretation questions which are also of great practical significance: (1) the appropriate scale to achieve FCS (national or transboundary population level); (2) the respective roles of demographic, genetic and ecological factors in determining FCS; and (3) the use of extinction versus carrying capacity as benchmark. Regarding these questions, we identify approaches that are workable and effective, as well as likely to be endorsed by the EU Court.