A fundamental challenge in habitat ecology and management is understanding the mechanisms generating animal distributions. Studies of habitat selection provide a lens into such mechanisms, but are often limited by unrealistic assumptions. For example, most studies assume that habitat selection is constant with respect to the availability of resources, such that habitat use remains proportional to availability. To the contrary, a growing body of work has shown the fallacy of this assumption, indicating that animals modify their behavior depending on the context at broader scales. This has been termed a functional response in habitat selection. Furthermore, a diversity of methods are employed to model functional responses in habitat selection, with little attention how methodology might affect scientific and conservation conclusions. Here, we first review the conceptual and statistical foundations of methods currently used to model functional responses and clarify the ecological tests evaluated within each approach. We then use a combination of simulated and empirical datasets to evaluate the similarities and differences among approaches. Importantly, we identified multiple statistical issues with the most widely applied approaches to understand functional responses, including: (1) a complex and important role of random- or individual-level intercepts in adjusting individual-level regression coefficients as resource availability changes, and (2) a sensitivity of results to poorly informed individual-level coefficients estimated for animals with low availability of a given resource. Consequently, we provide guidance on applying approaches that are insensitive to these issues with the goal of advancing our understanding of animal habitat ecology and management. Finally, we characterize the management implications of assuming similarity between the current approaches to model functional responses with two empirical datasets of federally threatened species: Canada lynx (Lynx canadensis) in the United States, and woodland caribou (Rangifer tarandus caribou) in Canada. Collectively, our assessment helps clarify the similarities and differences among current approaches and, therefore, assists the integration of functional responses into the mainstream of habitat ecology and management.