The range of Banksia plagiocarpa is limited to Hinchinbrook Island, where it is found on the top and slopes of Mount Bowen and Nina Peak, and the adjacent mainland on the Queensland north coast, where it is found on the summit and slopes of Bishops Peak. The annual rainfall is . The habitat is either open woodland or grassland, and it can be the dominant shrub. The altitude it grows at on Hinchinbrook is between , on gravelly, rocky or clay soils, and in association with such plants as tantoon (Leptospermum polygalifolium) and she-oaks (Casuarina), as well as Banksia aquilonia at lower altitudes below . On the mainland, it is found in a more sandy soil, often near water.