Coffee cultivation plays a role in biodiversity alteration and conservation in much of the tropics. This is particularly so in Ethiopia, where coffee is an indigenous shrub and a major commodity in national and local trade. In southwestern Ethiopia, coffee (Coffea arabica, “highland coffee”) is harvested from both forests (its natural habitat) and from within farmland where it is grown in small patches under isolated shade trees. We investigated the effects of management practices on bird assemblages in each of these systems. We found that bird assemblages in the forest remnants were distinct from those in the farmland even if many species were regularly found in both habitats. Coffee cultivation in open farmlands promoted bird species diversity through the retention of forest trees, while coffee cultivation in forests reduced bird diversity. Forest coffee management may, however, ensure that forest remnants are not converted to other forms of more open agriculture. Certification standards for “ecologically friendly” coffee in Ethiopia need to take this complexity into account.