Fetlar is extremely rich in wildlife. Here, one of Britain's rarest breeding birds, the red necked phalarope, can be seen at very close quarters. During June and July these remarkably tame, brightly coloured birds feed along the shores of the Loch of Funzie and breed at the Mires of Funzie (part of the RSPB Reserve on Fetlar) which can be viewed from the RSPB hide. Since 1986 there has been a team effort between the RSPB, crofters, landowners and SNH.

Although red necked phalaropes have drastically declined throughout Britain and Ireland, the population on Fetlar has recently started to recover with 30-40 pairs (90% of the UK population) breeding on the island. About 80 pairs of whimbrel (15% of the UK breeding population) breed on Fetlar. Whimbrel are very similar to their larger cousin the curlew, but have a pale stripe through the centre of the crown and a characteristic and evocative call. A good place to see them is along the road to the airstrip. Fetlar was once home to Britain's only pair of breeding snowy owls. Recorded in 1967 by the late Bobby Tulloch, they bred successfully each year until 1975.

Unfortunately no snowy owls have been seen since May 1995. Other bird life of interest in Fetlar includes red-throated diver, golden plover, ringed plover, dunlin, eider duck, Arctic skua, great skua, Artic tern and oystercatchers. Storm petrels and manx shearwaters can be seen in the Wick of Tresta in the late evening and early morning, and fulmars, black guillemots, kittiwakes, shags and puffins can be seen around the coast. Urie and the old pier at Brough are particularly good spots for observing otters and seals. From April to August a succession of wild flowers brightens the landscape. The rarer varieties include the frog orchid, creeping willow, water aven, knotted pearlwort and lesser twayblade.