Orton gave the definitive classification in the journal Transactions of the British Mycological Society (now Fungal Biology).

[1] The genus name Psathyrella is a diminutive form of Psathyra, derived from the Greek word meaning "friable", psathuros (ψαθυρος).

[citation needed] Typically small- to medium-sized, P. ammophila is found growing terrestrial or in small clumps near marram grass.

The tissue is not hygrophanous and therefore does not change colour with moisture loss and absorption, but the mushrooms do darken to a dark brown as they age.

[2][3][4] The gills of P. ammophila are crowded and attached to the stem usually broadly (adnate) but occasionally narrowly (adnexed).

[4] Psathyrella ammophila has a wide but sparse distribution throughout the European continent and in limited coastal locations outside Europe, with records of collection in Algeria, New Zealand, and Canada.

[2][5] The presence of marram grass nearby is a key aspect of its habitat, as it has a symbiotic (specifically, commensal) relationship with the plants, using their decaying roots as food.