"The owl is an animal that lives at night."
Translation:Le hibou est un animal qui vit la nuit.
"Habiter" (lit. to inhabit/dwell) can be synonymous with "vivre" when a location is mentioned and more likely when human beings are concerned: il habite dans une maison/dans la forêt/en France...
"Dans la nuit" is temporal, so "habiter" cannot work.
Also, you have used "que" but you needed "qui", the relative pronoun subject of the following verb.
The relative pronoun "que" is the direct object of the following verb.
- un animal qui vit la nuit: "qui" is the subject of "vit".
- un animal que je connais: the subject of "connais" is "je" and the direct object is "que".