The nebula did not appear in images taken before September 2003; it was discovered in 2004 by amateur astronomer Jay McNeil using a 3-inch telescope.

University of Hawaii researcher Bo Reipurth's preliminary studies have determined that McNeil's Nebula appeared when V1647 Ori, a pre-main sequence star, experienced an outburst called a FU Orionis or EX Lupii type event.

In November 2018 the Sky & Telescope website reported that the nebula had disappeared.

On November 5, an observer using the 500-mm Gemini telescope at the Iowa Robotic Observatory reported its disappearance.

Another observer using a 30-inch Dobsonian telescope on November 3 also failed to detect the nebula.