The fruit bodies of the ghost fungus can be found on dead or diseased wood.
They may be first seen at night as a pale whitish glow at the base of trees in a eucalypt forest.
The cap is very variable in colour, sometimes cream though often tinted with orange, brownish, greyish, purple or even bluish-black shades.
The margin is lighter, generally cream, though brown forms have tan or brown edges.
The centre generally has several darker shades, and younger specimens are often darker.
Growing up to 30 cm (12 in) in diameter it is funnel-shaped or fan-shaped in appearance with inrolled margins.
The cream-white gills are decurrent and often drip with moisture.
They are up to 13 mm (0.5 in) deep, somewhat distant to closely spaced, and have a smooth edge until they erode in maturity.
The stipe may be central to lateral in its attachment to the cap and is up to 8 cm (3 in) long and tapers to the base.
The thin flesh is generally creamy white in colour, but can have reddish tones near the base of the stipe.
There is no distinctive smell or taste.
The spore print is white.

The spores are roughly elliptical, or, less commonly, somewhat spherical, and have dimensions of 7.5–9.5 by 5–7 μm.
They are thin-walled, inamyloid, and have a smooth surface.
Each features a prominent hilar appendage.
The basidia (spore-bearing cells), measuring 32–42 by 6–9 μm, are club-shaped and four-spored, with sterigmata up to 7 μm long.
Cheilocystidia (cystidia found on the gill edges) are abundant, and measure 15–40 by 3–6 μm; no pleurocystida (cystidia on the gill faces) are present.
The cap cuticle comprises a thin layer of 3–6 μm-wide hyphae that are interwoven either loosely or tightly.
All hyphae of O. nidiformis have clamp connections.

The bioluminescence of O. nidiformis fruit bodies is best seen in low-light conditions when the viewer's eyes have become dark-adapted.
The gills are the most luminescent part of the fungus, emitting a greenish light that fades with age.
Although the intensity of the luminescence is variable, William Henry Harvey once reported that it was bright enough to read a watch face by.
It is not known if the mycelium is also luminescent.

Omphalotus nidiformis may be confused with the edible brown oyster mushroom (Pleurotus australis), which is brown and does not glow in the dark.
Confusion with another edible lookalike, Pleurotus ostreatus, common in the Northern Hemisphere and cultivated commercially, has been the source for at least one case of poisoning reported in the literature.
The fruit bodies of the ghost fungus can be found on dead or diseased wood. They may be first seen at night as a pale whitish glow at the base of trees in a eucalypt forest. The cap is very variable in colour, sometimes cream though often tinted with orange, brownish, greyish, purple or even bluish-black shades. The margin is lighter, generally cream, though brown forms have tan or brown edges. The centre generally has several darker shades, and younger specimens are often darker. Growing up to 30 cm (12 in) in diameter it is funnel-shaped or fan-shaped in appearance with inrolled margins. The cream-white gills are decurrent and often drip with moisture. They are up to 13 mm (0.5 in) deep, somewhat distant to closely spaced, and have a smooth edge until they erode in maturity. The stipe may be central to lateral in its attachment to the cap and is up to 8 cm (3 in) long and tapers to the base. The thin flesh is generally creamy white in colour, but can have reddish tones near the base of the stipe. There is no distinctive smell or taste. The spore print is white.
The spores are roughly elliptical, or, less commonly, somewhat spherical, and have dimensions of 7.5–9.5 by 5–7 μm. They are thin-walled, inamyloid, and have a smooth surface. Each features a prominent hilar appendage. The basidia (spore-bearing cells), measuring 32–42 by 6–9 μm, are club-shaped and four-spored, with sterigmata up to 7 μm long. Cheilocystidia (cystidia found on the gill edges) are abundant, and measure 15–40 by 3–6 μm; no pleurocystida (cystidia on the gill faces) are present. The cap cuticle comprises a thin layer of 3–6 μm-wide hyphae that are interwoven either loosely or tightly. All hyphae of O. nidiformis have clamp connections.
The bioluminescence of O. nidiformis fruit bodies is best seen in low-light conditions when the viewer's eyes have become dark-adapted. The gills are the most luminescent part of the fungus, emitting a greenish light that fades with age. Although the intensity of the luminescence is variable, William Henry Harvey once reported that it was bright enough to read a watch face by. It is not known if the mycelium is also luminescent.
Omphalotus nidiformis may be confused with the edible brown oyster mushroom (Pleurotus australis), which is brown and does not glow in the dark. Confusion with another edible lookalike, Pleurotus ostreatus, common in the Northern Hemisphere and cultivated commercially, has been the source for at least one case of poisoning reported in the literature.
Omphalotus nidiformis