The species was first described scientifically online in May 2011 in the journal Mycologia, authored by American mycologists Dennis E. Desjardin, Kabir Peay, and Thomas Bruns.

The description was based on two specimens collected by Bruns in 2010 in Lambir Hills National Park, in Sarawak, Malaysia.

The species had first appeared in the literature in 2010 in a study of the ectomycorrhizal mushrooms in a tropical dipterocarp rainforest in Lambir Hills, although it was not formally described in this publication.

[3] The similarity between the species collected in Borneo and Spongiforma thailandica was confirmed with molecular analysis, which showed a 98% match between ribosomal DNA sequences of the two.

[4] The genus name Spongiforma refers to the sponge-like nature of the fruit body, while the specific epithet squarepantsii is a Latinisation of the well-known Nickelodeon cartoon character SpongeBob SquarePants, whose shape was purported to share a resemblance to the fungus.

Additionally, the authors note that the spore-bearing surface (the hymenium), when viewed with scanning electron microscopy, somewhat resembles a "seafloor covered with tube sponges, reminiscent of the fictitious home of SpongeBob".

When mounted in a 3% KOH solution, the spores are pale lilac grey, and the surface ornamentation forms swollen pustules that loosen and dissolve.

[4] Spongiforma squarepantsii was found growing on the ground in Lambir Hills National Park, Sarawak State, Malaysia.