It occurs in east Asia, Europe, and eastern North America, where it typically grows on tree bark, much less frequently on rocks, and rarely on moss.

The type specimen was collected by Hale in Shenandoah National Park, Virginia, USA, at an altitude of 900 m (3,000 ft); there it was found growing on white oak (Quercus alba).

In terms of important morphological characteristics of the lichen, and its main distinguishing feature from the similar Parmelia saxatilis), Hale emphasized the squarrose (with many short, more or less perpendicular lateral branches) structure of the rhizines.

Upper surface is flat to pitted (foveolate) with laminal and marginal pseudocyphellae often forming a reticulate network; the isidia are cylindrical, measuring up to 0.5 mm tall and becoming dense in the older, central part of the thallus.

P. squarrosa also has a wider distribution in the southern Appalachians, extending to the lower foothills, unlike P. saxatilis and P. sulcata which are restricted to high mountain habitats.

The lichen thrives in humid forests, particularly those near coastal areas, and has been observed growing on a variety of trees, including coniferous and deciduous species.

Nonetheless, to identify specimens that are either small in size or not fully developed, it may be necessary to scrape the lower surface using a scalpel or razor blade.