Monitoring is essential to track the long-term recovery of endangered species. Greater emphasis on habitat monitoring is especially important for taxa whose populations may be difficult to quantify (e.g., insects) or when true recovery (delisting) requires continuous species-specific habitat management. In this paper, we outline and implement a standardized framework to facilitate the integration of habitat monitoring with species recovery efforts. The framework has five parts: (1) identify appropriate sample units, (2) select measurable indicators of habitat requirements, (3) determine rating categories for these indicators, (4) design and implement appropriate data collection protocols, and (5) synthesize the ratings into an overall measure of habitat potential. Following these steps, we developed a set of recovery criteria to estimate habitat potential and initially assess restoration activities in the context of recovering an endangered insect, the Karner blue butterfly (Lycaeides melissa samuelis). We recommend basing the habitat potential grading scheme on recovery plan criteria, the latest information on species biology, and working hypotheses as needed. The habitat-based assessment framework helps to identify which recovery areas and habitat patches are worth investing in and what type of site-specific restoration work is needed. We propose that the transparency and decision-making process in endangered insect recovery efforts could be improved through adaptive management that explicitly identifies and tracks progress toward habitat objectives and ultimate population recovery.