M78 is the brightest diffuse reflection nebula of a group of nebulae that includes NGC 2064, NGC 2067 and NGC 2071. This group belongs to the Orion B molecular cloud complex and is about 1,350 light-years distant from Earth. M78 is easily found in small telescopes as a hazy patch and involves two stars of 10th and 11th magnitude. These two B-type stars, HD 38563 A and HD 38563 B, are responsible for making the cloud of dust in M78 visible by reflecting their light.

The M78 cloud contains a cluster of stars that is visible in the infrared. Due to gravity, the molecular gas in the nebula has fragmented into a hierarchy of clumps, the denser cores of which about to form stars with masses of up to 5 M☉. About 45 variable stars of the T Tauri type,young stars still in the process of formation. Similarly, 17 Herbig–Haro objects are known in M78.