It is widespread in north temperate regions and is parasitic on another species of fungus (Stereum sanguinolentum) that grows on dead attached and recently fallen branches of conifers.

[3] It was not until 1961 that this central core was shown by American mycologist Robert Bandoni to be the remains of the host fungus, Stereum sanguinolentum.

The basidia are tremelloid (spherical to ellipsoid, with oblique to vertical septa), 13–20 by 12–17 μm, usually unstalked.

[4][5] Naematelia encephala is a parasite of Stereum sanguinolentum, growing on and often completely enveloping host basidiocarps.

Following its host, fruit bodies are typically found on dead, attached or recently fallen branches of conifers.