First described in 1860, the fungus is found in subtropical Asia, including India, Japan, Taiwan, Polynesia, Indonesia, and Sri Lanka, in Australia, and Brazil.

Fruiting occurs in forests on fallen woody debris such as dead twigs, branches, and logs.

[3] The original specimens were collected from the Bonin Islands by American botanist Charles Wright in October 1854 as part of the North Pacific Exploring and Surveying Expedition of 1853–56.

Japanese mycologists Seiya Ito and Sanshi Imai studied these collections in the late 1930s, and concluded that Agaricus cyanophos was the same species as M. chlorophos, despite differences in cap shape, gill attachment, and the color of emitted light.

[2] Some authors have considered M. illuminans to be synonymous with M. chlorophos due to their morphological similarity, but molecular analysis has shown that they are distinct species.

The cap has radial grooves extending to nearly the center, and sometimes develops cracks in the margin, which has small rounded teeth.

The tips of the cheilocystidia are drawn out to a point, or have a short appendage measuring 15 by 2–3 μm, which is sometimes branched, and is thin or slightly thick-walled.

The caulocystidia (cystidia on the stem) are conical or lance-shaped, hyaline, and smooth, with walls that are thin or slightly thickened.

M. discobasis fruit bodies have paler caps; microscopically, they have larger spores measuring 9.9 by 6.7 μm, and lack the short apical appendage found on M. chlorophos cheilocystidia.

[2] Fruit bodies of Mycena chlorophos are found in forests, where they grow in groups on woody debris such as fallen twigs, branches, and bark.

[8] In the Japanese Hachijo and Bonin Islands, mushrooms occur predominantly on decaying petioles of the palm Phoenix roebelenii.

[6][9] Experimental studies have shown that mushroom primordia that are too wet become deformed, while conditions that are too dry cause the caps to warp and break because the delicate gelatinous membrane covering them is broken.